Deck 4: Professional Liability: the Legal Challenges

Question 1

Use the fact situation in Q6 to answer the related question that follows. In this situation,the preparation of the financial statement by Mr.Wallice,the accountant,constituted

A)negligent misrepresentation only.
B)breach of contract only.
C)negligence only.
D)negligence,breach of contract and negligent misrepresentation.
E)only negligence and breach of contract.

Answer 1

D

Question 2

The difference between a negligent misrepresentation and a fraudulent misrepresentation is that

A)a fraudulent misrepresentation requires only a breach of duty of care and skill,while a negligent misrepresentation requires at least some guilty knowledge or willful disregard of the falsity of information provided.
B)a negligent misrepresentation requires only a breach of duty of care and skill,while a fraudulent misrepresentation requires at least some guilty knowledge or willful disregard of the falsity of information provided.
C)there is no practical difference between a fraudulent misrepresentation and a negligent misrepresentation
D)a fraudulent misrepresentation does not require guilty knowledge or willful disregard of the falsity of information provided,while a negligent misrepresentation does.
E)a negligent misrepresentation does not require a breach of duty of care and skill,while a fraudulent misrepresentation does.

Answer 2

B

Question 3

In a lawsuit against a professional for a breach of duty of care,a prudent plaintiff should

A)sue in contract for breach of contract for failure to properly perform services.
B)sue in tort for breach of fiduciary duty.
C)sue in tort for negligence arising from a breach of duty of care.
D)sue in tort for negligence arising from a breach of duty of care and in contract for breach of contract for failure to properly perform services.
E)sue in contract for negligence arising from a breach of duty of care and sue for breach of fiduciary duty.

Answer 3

D

Question 4

Use the fact situation in Q6 to answer the related question that follows. In this situation Henry's telling Carol to get the financial statement from the bank constitutes

A)a negligent misrepresentation.
B)an innocent misrepresentation.
C)negligence.
D)a breach of the duty to act in good faith.
E)none of the above

Question 5

The duties of professionals may be categorized as

A)fiduciary,duty in tort,and duty to employees.
B)contractual,duty to employees,and duty in tort.
C)duty in tort,business duty,and contractual duty.
D)general duty,contractual duty,and duty in tort.
E)contractual,fiduciary and duty in tort.

Question 6

Where a professional undertakes a task that is beyond the usual skills of his or her profession,

A)the professional must still follow the recommended standard.
B)the professional must use the degree of skill and knowledge commensurate with the task undertaken.
C)the professional must follow a well-known practice.
D)the professional must follow all standards suggested as the proper standard.
E)the professional need not follow any standard.

Question 7

The Hedley Byrne case establishes the principle of liability to ________ for ________.

A)third parties; negligence misrepresentation
B)clients; breach of fiduciary duty
C)third parties; tort
D)friends and relatives; negligence
E)clients; breach of contract

Question 8

A lawyer who enters into a business transaction with a client and neglects to inform the client that his credit rating is poor may be found to be

A)in breach of the law that governs lawyers.
B)in breach of his or her duty to inform the client.
C)in breach of contract.
D)in breach of the common law.
E)in breach of his or her fiduciary duty.

Question 9

Use the fact situation in Q6 to answer the related question that follows. In this situation,if the value of the company increases substantially so that Carol makes money on her investment,

A)Carol will still suffer damages,but will only have an action against the accountant.
B)Carol will still suffer damages,but will only have an action against Henry.
C)Carol will still suffer damages,but will only have an action against the bank.
D)Carol will still suffer damages and have an action against the accountant and the bank.
E)Carol has suffered no damages and has no action at all.

Question 10

Negligent misrepresentation is

A)a defamatory statement.
B)a statement that is fraudulent.
C)a statement that is made by one party to another and induces the other person to engage in negligent acts.
D)a statement that insults another.
E)an incorrect statement that is made without due care for its accuracy.

Question 11

James,one of the partners of James & Fiduciary Duty Co.,the auditors of a major Canadian corporation (Canco),is one of the major shareholders of Canco.This situation could result in a

A)violation of the statute.
B)breach of duty.
C)conflict of interest.
D)fiduciary duty.
E)breach of contract.

Question 12

A lawyer who enters into a contact to purchase his or her client's summer cottage has

A)lots of money.
B)committed a breach of contract.
C)a conflict of interest.
D)a duty not to bargain with the client for the best price.
E)lots of time on her or his hands.

Question 13

A conflict of interest can be said to arise

A)where a professional represents two or more parties,each of whom has an opposing interest.
B)when a client's interest conflicts with the interest of another person represented by the same professional.
C)where a client's interest conflicts with the interest of the professional representing the client.
D)where a professional represents two parties,each of whom has a competing interest.
E)all of the above

Question 14

Use the fact situation in Q6 to answer the related question that follows. In this situation,the bank's conduct in giving the erroneous financial statement to Carol constituted

A)a breach of contract only.
B)a negligent misrepresentation.
C)a fraudulent misrepresentation.
D)negligence only.
E)neither negligence,no breach of contract or negligent misrepresentation.

Question 15

A misrepresentation is

A)a false assertion of fact made without knowledge of its falsity,and with honest belief in its truth.
B)a false assertion of fact made with knowledge of its falsity,or without honest belief in its truth.
C)a false assertion of fact about another person that defames that person.
D)a statement of fact that was true when it was made,but later became false due to changes in circumstances.
E)a missed representation.

Question 16

The contractual duty of a professional contains a promise

A)to perform the services with due care.
B)to accept payment rendered for services.
C)to work for the client.
D)to engage other agents in pursuance of the contract.
E)to submit invoices denominated in Canadian dollars only.

Question 17

Alice Walters is a patient of Dr.John Good,a heart surgeon.Dr.Good had just begun to tell Alice that her treatment wasn't working and that she would need to have surgery to correct a defect in her heart,but then he was called away on an emergency and forgot to return to his conversation with Alice and explain all of the risks of the surgery to her.In fact,Dr.Good had diagnosed Alice's condition three years ago after returning to work from his office Christmas party.He had had a number of alcoholic beverages,and this caused him to misinterpret a lump on her lung for a lump on her heart.After diagnosing Alice,Dr.Good had told Alice that the problem was with her heart and then prescribed treatment for it.Relying on what Dr.Good had told her,Alice had accepted the treatment,which was very painful.In this situation,it can be said that

A)Dr.Good made a negligent misrepresentation about the nature of Alice's problem and the treatment for it.
B)Dr.Good was negligent in his diagnosis.
C)Dr.Good failed to obtain from Alice an informed consent.
D)Dr.Good committed a breach of contract in misdiagnosing Alice's condition.
E)all of the above

Question 18

A fiduciary duty exists between a professional and his or her client when

A)the professional lends money to the client.
B)the principle of equity imposes such a duty.
C)the client owes money to the fiduciary.
D)a special relationship of trust exists.
E)a contract exists between the professional and the client.

Question 19

Which of the following is true?

A)The ordinary standard of care for ordinary negligence,is appropriate when judging the work of a professional.
B)Complying with normal professional standards is always an adequate defence.
C)Causation in professional-client relationships is not based on reliance.
D)A professional who exhibits the degree of skill and knowledge that is commensurate with a particular task will be held to have met the required standard even if the advice given is wrong.
E)The duty to take reasonable care does not include omissions.

Question 20

Use this fact situation to answer the related questions that follow. Henry Jones is the sole shareholder of Happy Go Lucky Company (HGLC).Henry,needing a loan from his bank,went to his accountant,Bob Wallice,and asked him to prepare a financial statement of the company that Henry could give to the bank to get the loan.Unfortunately,Mr.Wallice included certain property that did not belong to the company,which increased its value.When Henry took the financial statement to the bank,the bank caught the error,but made Henry guarantee the loan.The bank then told Mr.Wallice,who forgot to correct the error in the financial statement.A few days later,Henry decided he needed to invest more money in his company and began negotiations with a business associate,Carol Hill.When Carol asked for the financial statement of the company,Henry told her she could get it from the bank or from his accountant.Carol decided to go to the bank,which gave her the financial statement with the error in it.Based on the financial statement,Carol invested $50 000.00 in the company,only to realize a month later the problem with the financial statement the bank had given to her.
In this situation,

A)Mr.Wallace owed a fiduciary duty to Carol.
B)the bank owed a fiduciary duty to Carol.
C)Mr.Wallace owed a fiduciary duty to Harry.
D)Mr.Wallace owed a fiduciary duty to the bank.
E)all of the above

Question 21

A professional is

A)a person who is licensed by various levels of government.
B)a person who has a special accreditation or degree from a professional organization.
C)a person who belongs to a special club.
D)someone who sets him- or herself out to help the public.
E)someone who has specialized knowledge and skill on which a client relies and for which a client is prepared to pay.

Question 22

A fiduciary duty may exist in the absence of a contractual duty.

Question 23

Damages for breach of fiduciary duty is restitutionary in that

A)the breach is not a tort.
B)the breach is not a breach of contract.
C)the client may be contributorily negligent.
D)the client is entitled to be placed in the position he or she would have been had the breach not occurred.
E)the professional is required to give back what she or he has taken from the client.

Question 24

Damages for breach of contract and breach of fiduciary duty are based on the same principle.

Question 25

A duty to account is

A)the duty of the court to examine the accounts of a professional who is accused of having misappropriated funds.
B)the duty of a professional to submit timely and accurate bills to the client for payment.
C)the duty owed by a person who commits a breach of trust to hand over profits made as a result of the breach.
D)the duty of a client to pay bills that are rendered by the professional.
E)the duty of the professional to maintain accurate accounts of the invoices submitted to his or her client.

Question 26

If the plaintiff has suffered no damages,a defendant who has breached a fiduciary duty will not be held liable.

Question 27

A multi-disciplinary partnership is

A)a partnership between two or more persons who belong to different professions.
B)a partnership between two or more persons who belong to the same profession.
C)a partnership of persons in the same profession who have different specializations.
D)a limited partnership.
E)a partnership whose members have been disciplined for misconduct.

Question 28

The essence of causation in professional-client relationships is the suffering of harm or damage.

Question 29

If a client sues a professional for failing to exercise reasonable care in giving advice,but the client has suffered no damage as a result,the professional will not be liable.

Question 30

Liability for breach of a fiduciary duty may arise even where there has been no negligence.

Question 31

Like any other standard of care,the standard of care for professionals evolves and changes as the law evolves and changes.

Question 32

Which of the following is NOT true?

A)A fiduciary duty exists when there is an existing contract between the professional and the client.
B)The principles for determining damages for breach of contract and breach of fiduciary duty are not necessarily the same.
C)A fiduciary duty requires that a professional avoid situations that give rise to a conflict of interest.
D)The existence of a fiduciary duty means that a lawyer cannot,as a general rule,act for a purchaser and vendor at the same time.
E)A fiduciary duty requires complete fidelity and loyalty to the other party.

Question 33

A professional may owe a duty of care in tort to someone other than the client.

Question 34

Generally speaking,all professional organizations have a number of the same responsibilities.

Question 35

The duty of a professional to take reasonable care does not include a duty not to omit essential matters.

Question 36

Normal standards of care always apply to professionals who undertake a task beyond the usual skills of the profession.

Question 37

The greater exposure of professionals to liability for professional negligence has led to the extensive use of

A)private investigators.
B)acceleration clauses.
C)liability insurance.
D)disclaimer clauses.
E)professional fees.

Question 38

What is deceit?

Question 39

Where two professionals have specialized knowledge and skill in the same profession,representation of one by the other negates the usual standard of care for the professional who is representing the other.

Question 40

A disclaimer is

A)a statement made by one person to the effect that the person making the statement will assume liability for loss up a certain specified limit.
B)a statement to the effect that the person making it does not assume any responsibility for an action.
C)an exclamation.
D)a statement made in a soft voice or tone.
E)a statement in a claim of a client against a professional to the effect that the client seeks to claim damages for specified breaches.

Question 41

What is a conflict of interest?

Question 42

Causation is the third condition that must be proven to sustain an action for tort liability.Explain.

Question 43

In a lawsuit alleging negligent misrepresentation the plaintiff must establish more than a breach of duty causing loss.Identify the five requirements for proving negligent misrepresentation as set by the Supreme Court of Canada.

Question 44

A professional must not place him or herself in a position where his or her interest and duty conflict.Explain.

Question 45

Professionals may have liability to their clients in tort and contract,and for breach of fiduciary duty.Briefly explain the basis for liability in these categories.

Question 46

What are professional bodies? Explain the role of professional bodies.

Question 47

What is a fiduciary duty?

Question 48

Explain what is meant by the "duty to account" of a professional who has committed a breach of trust.

Question 49

Which is easier to prove,fraudulent or negligent misrepresentation? Why?

Question 50

Deciding on the type of action to bring for acts or omissions of a professional who breached a duty of care was not always easy,but this has changed.Explain.

Question 51

What is a fiduciary duty?

Question 52

Damages for breach of fiduciary duty and breach of contract are based on the same principle.Explain.

Question 53

What is the difference between negligent misrepresentation and fraudulent misrepresentation?

Question 54

What is a multi-disciplinary partnership?

Question 55

Although the law has long recognized some professional relationships as inherently fiduciary (such as lawyer-client and doctor-patient),not every professional relationship will be fiduciary in nature.Explain.