Professionals Can Be Liable to Non-Contracting Parties if Their Relationship Approximates Privity

Credit Alliance Corp. v. Arthur Andersen & Co., 65 N.Y.2d 536 (1985)

In Credit Alliance, the Court of Appeals held that accountants could be liable to noncontractual parties if the relationship of the parties approached that of privity.  Specifically, the court held that an accountant could be liable, absent privity of contract, to a party who relies to his detriment on a negligently prepared financial report if (i) the accountant was aware that the financial reports were to be used for a particular purpose, (ii) in the furtherance of which a known party was intended to rely, and (iii) there must have been some conduct on the part of the accountant linking him to that party which evinces his understanding of that parties’ reliance.