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Chapter 4

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Valerie Irie

BU231 Chapter 4 – Professional Liability: The Legal Challenges Week 1 Professional Liability: The Legal Challenges -When a client seeks and relies on professional advice that turns out to be wrong, the question arises: should the professional be liable for the loss or harm suffered by the client or even by someone else who relies on incorrect advice? -Tort is one way to assign liability to a professional -Another way a professional may be found liable is for breach of contract if there is a contract to supply the advice -Almost all professionals carry liability insurance Liability of Professionals -Liability may arise from three relationships, generating three different causes of action: -The contractual relationship leads to a breach of contract cause of action -The fiduciary relationship leads to break of fiduciary duty; and/or -The duty of care owed in tort leads to a tort cause of action Contractual Obligations -An agreement to provide professional services to a client contains a promise whether stated expressly or not, to perform those services competently -Sometimes there is no contract between the professional and the injured party; in such circumstances fiduciary or tort law are the only alternatives Fiduciary Duty -Fiduciary duty a duty imposed on a person who stands in a special relation of trust to another -This duty can arise even when the professional donates services free of charge so that no contract exists -Fiduciary relationships have three characteristics: -The fiduciary has scope for the exercise of some discretion or power -The fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary’s legal or practical interests -The beneficiary is particularly vulnerable to or is at the mercy of the fiduciary holding the discretion or power -Not every professional relationship is a fiduciary one -If a fiduciary duty is found to exist, the law imposes a wider range of obligations on the professional than is expressly stated in the contract or required under tort law -The second step to imposing this type of liability involves determining if the professional’s behaviour breaches the fiduciary obligations -Conflict of interest – a situation where a duty is owed to a client whose interests conflict with the interests of the professional, another client, or another person to whom a duty is owed Tort Liability -When a professional deliberately or carelessly causes damage to a client, a tort has occurred -Their contract may also have been breached -A plaintiff may sue in contract or in tort -Sometimes “other” people may rely on a professional opinion given to a single client -Third-party liability – liability to some other person who stands outside a contractual relationship BU231 Chapter 4 – Professional Liability: The Legal Challenges Week 1 Choosing a Cause of Action -Sometimes a professional may be liable in tort but not in contract, or may be liable for breach of fiduciary duty without having been negligent -The choice of cause of action might also affect the amount of damages awarded in some cases -The principles for determining the measure of damages are not exactly the same in contract as in tort -Duty to account – the duty of a person who commits a breach of trust to hand over any profits derived from the breach Tort Liability for Inaccurate Statements Misrepresentation -If a person makes an untrue statement, knowing it to be untrue, or at any rate, without an honest belief in its truth and with the intention to mislead some other person, the misrepresentation is fraudulent and amounts to the intentional tort of deceit -Deceit – an intentional tort imposing liability when damage is caused by a false statement made with the intention of misleading another person -Fraudulent misrepresentation – an intentional tort imposing liability for an incorrect statement made knowingly with the intention of causing injury to another -Negligent misrepresentation – an unintentional tort imposing liability when an incorrect statement is made without due care or its accuracy, and injury is caused -Disclaimer – an express statemen
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