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Contract Law Restricts Third Party Users Of Suing A Professional

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Ultramares Privity of contract law restricts third party users of suing a professional. This law, however, has narrow scope and therefore new methods have emerged in order to protect third-party users. The first test is called the Ultramares test. Under this test, the third party must be a foreseeable user of the information provided by the accountant. First the CPA must know the name of the party using the information, the purpose, the extent of use, and the client intents to deliver this information primarily to the third party. In this case the CPA was not aware of the name of any third party user, but knew the end users would be investors, he knew that it would be used for an IPO since he audited the financials used in the registration statement. As a result, a judge would must likely find the CPA liable, however since he did not know the names of the third party, that can serve as a defense. For the second part of the engagement, investors who lost money in anticipation of the merger are not a proper plaintiff under Ultramares. The CPA did not know the name of the third party, or if the clients would provide hat information primarily to investors. Prosser Bank is also not a proper plaintiff under Ultramares due to the CPA being unaware of the name, extent of use, or if the bank was the primary user. Furthermore, the CPA firm conducts business in Florida, where the Ultramares law is not used by state. Instead Florida adopted the Restatement 3rd Sec. 552, which is
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