This article was originally published on Law.com.
In Part 1 of this trilogy – the “Citadel of Privity” (posted on July 31, 2012)—we explored the historical/legal antecedents/precedents in New York in respect of claims sounding in either contract or tort.
The Cardozo “quartet” – Glanzer, MacPherson, H.R. Moch and Ultramares – left the “citadel” of privity substantially in tact.
In Glanzer, defendants, who were engaged in business as public weighters, had every reason to know that the buyers intended to rely upon their certificates of weight.
In MacPherson, the automobile manufacturer knew that the retail dealer intended to re-sell the car to a third party.
In H.R. Moch, the record did not establish that the waterworks supplying water to the city undertook to be answerable to the public at large.
And, in Ultramares, the public accountants clearly owed a duty to both their client and their client’s counter-parties to prepare financial statements that were not fraudulent. However, absent fraud or gross negligence, the auditor had no duty or obligation to an open-ended class of possible recipients of the statements.
In this Part 2, we explore the evolution of the “privity” standards post-Cardozo and until the turn of the century. And in Part 3 (to be posted in September), we will discuss the current state of the law in New York with respect to privity.