Emergence of Third Party Liability Issues

Excerpted from Professional Liability to Third Parties, Second Edition

By Jay M. Feinman

Third party claims follow a common pattern. Two parties have a contract. The breach or negligent performance of one of the contracting parties injures the economic interests of a third party. The third party sues the negligently-performing party, either in tort or as a third party beneficiary. Consider the following:

• Purchasers of condominium units sue the developer's lawyer who prepared the public offering statement for failing to properly disclose negative information.

• Following the failure of a business, disappointed investors and lenders pursue the lawyers who issued the opinion, the accountants who performed the audits, and others who were involved in the deal gone sour.

• A subcontractor who is delayed in its performance on a construction project sues the owner's architect for negligently drawing the plans and supervising the construction.

• The successor in title to a landowner sues a surveyor or title abstracter whose errors in performing its contract with the original landowner caused the successor's interest to be less valuable than it expected when it purchased the land.

• The purchaser of a jet airplane sues the company that had serviced the plane for a previous owner for failing to keep proper maintenance logs.

Because third party liability issues arise from a wide range of fact situations, until very recently they have seldom been seen as part of a distinct field of law. Today that field, sometimes known as "economic negligence," brings together all of the instances of third party economic loss.

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