A financial advisor negligently provides incorrect investment advice to a client. The client, relying on the advice, incurs significant financial losses when their investments decrease in value. Additionally, the client’s business partner, who had no direct interaction with the financial advisor, also suffers financial losses because the client’s reduced funds lead to the cancellation of a joint project. Can the business partner recover damages from the financial advisor?
Yes, the business partner can recover damages because the losses were caused by the financial advisor’s negligence.
No, the business partner cannot recover damages because the financial advisor had no duty of care to them.
No, the business partner cannot recover damages because the advisor’s advice did not directly cause their financial loss.
Yes, the business partner can recover damages because they were indirectly harmed by the financial advisor’s actions.
In tort law, recovery for pure economic loss is typically limited because courts are cautious about imposing indefinite liability on defendants. The financial advisor’s negligence directly harmed their client due to their professional relationship, and this is a foreseeable and compensable loss. However, the business partner’s losses are secondary and fall into the category of relational or derivative economic losses, which lack the proximate relationship and foreseeability required for recovery. Tort law does not typically extend liability for economic harm beyond the direct parties unless an established duty exists.
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