First Principles of Business Law

4. 3. Recognised duty situations or relationships

4.3.14. Liability for negligent misstatements passed on to a third party

Read the facts below and then answer the question.

A, a financial advisor, meets with B, a new client, to advise her on her investments. In the course of their discussion, B tells A that her husband has mentioned investing in a company that has invented a new industrial process. She asks if A thinks shares in this company would be a good investment. Without checking the latest information, A says the company is certain to do well. Later that day, B passes this advice on to her husband C, who decides on the strength of it to invest $50,000 in the company. But if A had asked, he would have found out that the company was having trouble implementing the new technology. Six months later the company fails. C sues A for the loss he has suffered due to A's negligent misstatement.

A accepts that he might be liable to B for any advice he gave her, but he argues that he did not owe a duty of care to C, who was not present, and to whom the information was given indirectly by B. Is A correct?