First Principles of Business Law

12. Negligence

12 (b) 1.6. Establishing a duty of care: A duty of care when giving information or advice

A is an accountant. He is one of the guests at a friend's birthday party one evening. During the party, the talk turns to a mining company that is offering shares to the public. B, another guest at the party, asks A what he thinks of these shares. A says that, based on what he has read in the newspapers, they will probably be a sound investment. B knows that A is an accountant, and decides to act on this information. She buys $20,000 worth of the shares. However, within six months the mine fails and the shares are worthless. It turns out that the engineering techniques needed for this mine were largely untested on a commercial scale and the investment was highly risky. This was well known to everyone who had read all the information provided by the company when the shares were offered.

(a) As an accountant, A owes a duty of care to anyone to whom he gives wrong information or advice that causes them purely economic loss, whatever the circumstances.

(b) Even though he is an accountant, A might not owe a duty of care to a person to whom he gives wrong information or advice that causes purely economic loss.