As third parties continue to bolster their rights, a word of warning: beware who might rely on your work. And if you exclude liability, be fair about it
If these pages haven't scared you to death already of late with news of ever-increasing rights of third parties, this might just finish you off. It concerns "reliance" claims by third parties. These come about quite independently of any contract, where a third party that has close dealings with you relies on your negligent advice; you know (or should know) it is relying on your advice, and if as a result it suffers a loss, this may be held to have been foreseeable by you. What's more, a reliance claim has a nasty sting in the tail in that certain additional financial loss, known as "pure economic loss", is also claimable.

Now, as if that were not all quite horrible enough for those on the receiving end of a reliance claim, the case of The Royal Bank of Scotland vs Bannerman Johnstone Maclay may make things even worse. With its auditors' knowledge, a company called APC sent its audited accounts to a bank to enable the bank to assess whether APC was a good loan risk. You can guess the rest. The auditing was unsatisfactory and the bank watched its loan disappear down the plughole along with APC.

The bank launched a reliance claim against the auditors, which applied to strike it out. The auditors claimed the issue should not be whether they were aware that the bank was relying on the accounts for a purpose different to that for which they were prepared, but whether they actually intended that the bank should do so. The court would have none of this; knowledge of the bank's purpose was sufficient. Also, even though the auditors did not directly advise the bank, the court nevertheless found they had effectively assumed responsibility.

Being a Scottish case, Bannerman is not binding on English courts, but it should have considerable persuasive value, particularly as it cites English cases. However, despite causing some stir in legal circles, it is questionable whether Bannerman has really changed the law, or whether case law had already moved that way, at least south of the border. Either way, a duty of care may very well exist when a third party relies on work for a purpose other than that for which it is prepared.

I have read many exclusions of liability that, far from being reasonable, simply defy belief

In construction, there are many circumstances where this could arise: a practical completion certificate might trigger rent under a lease, a financier might view designs to assess loans, original designs might be used for extensions or alterations.

Certainly, for those looking, there are ways around the liability. If you are required to enter into a warranty with the third party in question, that warranty could state that it encompasses the full ambit of rights between the parties and no more are owed. Alternatively, some organisations systematically attach a disclaimer to any document or statement they believe may be passed to third parties. A leading firm of accountants routinely states: "We do not, in providing this [document] accept or assume responsibility for any other purpose or to any other person to whom this [document] is shown or in whose hands it may come".

A disclaimer along these lines would seem to dispose of the problem rather neatly. However, life is rarely that simple. First, your client may, understandably, object to your excluding any hint of liability to those with whom he does business and he may become particularly partial to their cause when they hold a gun to his head.