Explain the near privity approach to third-party negligence suits against accountants.
What will be an ideal response?
In contrast to the strict privity rule of Ultramares, several courts have adopted a near privity approach. It grew out of a case in which a seller employed a weigher to certify the weight of beans and to provide a copy of the certification to the buyer. Judge Cardozo, the author of Ultramares, held for the buyer in a suit against the weigher for inaccurately certifying the weight of the beans. Drawing from this opinion, several recent courts have held that accountants may be liable in negligence to third parties when three prerequisites are satisfied: (1) The accountants must have been aware that the financial reports were to be used for a particular purpose. (2) The accountant must have known the identity of the third parties and that they would rely on the reports. (3) There must have been some conduct on the part of the accountant linking her to the third party that evidences the accountant's understanding of the third party's reliance.
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