Deck 4: Professional Liability

Question 1

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

Answer 1

D

Question 2

The standard of care that the law imposes on a professional who is sued for negligence is

A) what a reasonable member of the profession would do in the circumstances
B) acting to the best of the professional's ability
C) making full disclosure to the client
D) the standard of care adopted by a particular professional body
E) whether the professional considered the best interests of the client

Answer 2

A

Question 3

A professional is

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

Answer 3

C

Question 4

Negligent misrepresentation is

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

Question 5

Until the 1980s, the duty of a professional in tort, was restricted to duties owed under the

A) law and the ethical rules of the profession.
B) the ethical rules of the profession.
C) statute that governed that particular profession.
D) common law.
E) contract.

Question 6

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

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

Question 7

Damages for breach of fiduciary duty is restitutionary in that

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

Question 8

The duties of professionals may be categorized as

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

Question 9

James has an agreement with his accountant. James can sue his accountant

A) in contract and in tort; and for breach of fiduciary duty.
B) in both contract and tort.
C) in tort.
D) in contract and for breach of fiduciary duty.
E) in contract.

Question 10

A misrepresentation is

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

Question 11

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

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

Question 12

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

Question 13

Self- regulating professions are governed by

A) the individual professional's own rules.
B) a governing body comprised mainly of the members of the profession.
C) federal legislation.
D) standards determined by a majority of the members of the profession.
E) provincial legislation.

Question 14

A multi- disciplinary partnership is

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

Question 15

James is a used car salesperson. He tells Mary that the vehicle he is selling to her has a new engine. James knows that what he is saying is not true. James could be liable for

A) breach of fiduciary duty.
B) defamation.
C) breach of contract.
D) negligence.
E) fraudulent misrepresentation.

Question 16

Which of the following is NOT a characteristic of a fiduciary relationship?

A) The fiduciary can unilaterally exercise the power of discretion so as to affect the beneficiary's legal or practical interests.
B) The beneficiary places trust in the fiduciary.
C) The beneficiary is particularly vulnerable to or at the mercy of the fiduciary holding the discretion or power.
D) The fiduciary is more wealthy than the beneficiary.
E) The fiduciary has scope for the exercise of some discretion or power.

Question 17

Which of the following is true?

A) Complying with normal professional standards is always an adequate defence.
B) Causation in professional- client relationships is not based on reliance.
C) The ordinary standard of care for ordinary negligence, is appropriate when judging the work of a professional.
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 18

Which of the following is a professional body UNABLE to do in disciplining members of the profession?

A) suspend members
B) reprimand members
C) conduct a hearing into a member's conduct.
D) expel them from the profession
E) conduct a criminal prosecution

Question 19

The contractual duty of a professional contains a promise

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

Question 20

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

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

Question 21

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 22

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

Question 23

The common law duty of care of a professional is confined to relationships that arise in contracts with clients.

Question 24

Professional organizations are established by provincial statutes.

Question 25

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

Question 26

A plaintiff is entitled to a higher damage award for breach of fiduciary duty.

Question 27

Most of the major professions are governed by professional organizations that are regulated by

A) provincial statutes.
B) the common law.
C) rules set by the professional bodies.
D) ancient rules of medieval guilds.
E) codes of conduct.

Question 28

Which of the following is NOT true?

A) 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.
B) A fiduciary duty exists when there is an existing contract between the professional and the client.
C) A fiduciary duty requires complete fidelity and loyalty to the other party.
D) The principles for determining damages for breach of contract and breach of fiduciary duty are not necessarily the same.
E) A fiduciary duty requires that a professional avoid situations that give rise to a conflict of interest.

Question 29

The essence of causation in the professional client relationship is reliance.

Question 30

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

Question 31

A duty to account is

A) the duty of a client to pay bills that are rendered by the professional.
B) the duty of the professional to maintain accurate accounts of the invoices submitted to his or her client.
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 the court to examine the accounts of a professional who is accused of having misappropriated funds.
E) the duty of a professional to submit timely and accurate bills to the client for payment.

Question 32

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

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

Question 33

An accounting firm negligently prepares an audit of a company. The audit is intended to help the shareholders in the work of supervising management. Some investors review the audit and, in reliance on the audit, purchase shares in the company. If the investors lose a substantial amount of money and they sue the accounting firm, the firm would be liable for

A) breach of fiduciary duty.
B) breach of contract.
C) would not be liable.
D) negligent misrepresentation.
E) the tort of libel.

Question 34

What is deceit?

Question 35

The value of a professional is that

A) he or she is able to assist a client in making a decision with the likelihood that the decision will be a sound one.
B) he or she is infallible.
C) he or she charges high fees for the services they perform.
D) he or she is required by law not to make mistakes.
E) he or she performs services in society.

Question 36

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

Question 37

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

Question 38

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) an exclamation.
C) a statement in a claim of a client against a professional to the effect that the client seeks to claim damages for specified breaches.
D) a statement made in soft voice or tone.
E) a statement to the effect that the person making it does not assume any responsibility for an action.

Question 39

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

Question 40

The major professions are governed by members of parliament.

Question 41

What is a multi- disciplinary partnership?

Question 42

What is a fiduciary duty?

Question 43

What is a conflict of interest?

Question 44

What is a fiduciary duty?

Question 45

What is a conflict of interest?

Question 46

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

Question 47

What is the difference between negligent misrepresentation and fraudulent misrepresentation?

Question 48

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 49

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

Question 50

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

Question 51

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