Transformation

[T]he growing complexity of business relations and the growing specialization of business functions all require more and more reliance in business transactions upon the representations of specialists... Further, the New York rule has the effect of plac­ing the burden of loss, as between the negligent maker of a misrepresentation and the plaintiff, upon the latter, though he be both injured and innocent.

The adoption of §552 was the signal event in this period that transformed the approach of most courts. Section 552 provides:

§552. Information Negligently Supplied for the Guidance of Others

(1) One who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuni­ary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.

(2) Except as stated in Subsection (3), the liability stated in Subsection (1) is limited to loss suffered

(a) by the person or one of a limited group of persons for whose benefit and guidance he intends to supply the information or knows that the recipient intends to supply it; and

(b) through reliance upon it in a transaction that he intends the information to influence or knows that the recipient so intends or in a substantially similar transaction.

(3) The liability of one who is under a public duty to give the information extends to loss suffered by any of the class of persons for whose benefit the duty is created, in any of the transactions in which it is intended to protect them.

The Texas Tunneling Court cited the first Restatement of Torts §552, which had expressed a rule analogous to the Ultramares rule. Under the original §552, ‘As in the case of fraudulent misrepresentations the liability is confined to those who are intended to rely upon the information and who rely upon it in a type of transac­tion in which it is the maker’s purpose to influence their conduct’.^[1276] Until this period, courts generally had been chary in applying the section, seldom expand­ing liability beyond the ‘end and aim’ logic of the section and Ultramares.

Following the drafting of the revised §552 a number of notable cases quickly applied it in an expansive fashion and asserted the policy basis for a broad applica­tion. Rusch Factors Inc v Levin was the first accountant liability case to depart from Ultramares.^[1278] Noting the breakthrough it was making, the Court offered a policy defence of its position:

Why should an innocent reliant party be forced to carry the weighty burden of an accountant’s professional malpractice? Isn't the risk of loss more easily distributed and fairly spread by imposing it on the accounting profession, which can pass the cost of insuring against the risk onto its customers, who can in turn pass the cost onto the entire consuming public? Finally, wouldn’t a rule of foreseeability elevate the cautionary tech­niques of the accounting profession? For these reasons it appears to this Court that the decision in Ultramares constitutes an unwarranted inroad upon the principle that ‘the risk reasonably to be perceived defines the duty to be obeyed’.^[1279]

In Rozny v Marnul,^[1280] liability was imposed on a surveyor in favour of a subsequent purchaser of negligently surveyed property. The Court distinguished between the reluctance to impose liability when the harm to the third party was merely ‘foreseeable’ and the willingness to impose liability ‘when the reliance of the third person might have been said to be known’. ^[1281] The Court considered and rejected the Ultramares limitation on liability in favour of foreseeability:

We agree that the unknown and unlimited liability factor, as so ably stated by Mr. Justice Cardozo in the Ultramares case, is not to be lightly discounted. But we deal here with a defendant who has included on his inaccurate plat an ‘ absolute guarantee for accuracy.’ As might reasonably have been foreseen by defendant who admitted that he knew the plats were customarily used by lending agencies and others, that plat was subsequently relied on to his damage by a third party in connection with the financing and purchase of the surveyed property.

The American Law Institute is in the process of drafting the Restatement (Third) of Torts: Liability for Economic Harm, with the first sections recently having been adopted. The R estatement (Third) begins with a rule that there is no general duty to avoid negligently inflicted economic loss.^[1283] Although there is no general duty, duties arise in particular classes as recognised in subsequent sections of the Restatement, and residual duties may be identified in appropriate circumstances.^[1284] Negligent misstatement is an instance of ‘ invited reliance,' one of the established exceptions to the Restatement’s rule of no general duty.^[1285] Section 5 of the Restate­ment (Third) repeats the terms of §552 with only minor changes in language.^[1286] The Restatement also specifies an action for negligently inflicted economic harm, with the elements of the causes of action essentially the same as for negligent misstatement;^[1287] the two actions are intended to be ‘complementary'.^[1288]

IV.