Expertise as Social Institution: Internalising Third Parties into the Contract
IMPLICIT DIMENSIONS OF CONTRACT: DISCRETE, RELATIONAL, AND NETWORK CONTRACTS, David Campbell, Hugh Collins and John Wightman, eds., Oxford University Press, pp. 333-363, 2003
26 Pages Posted: 29 Mar 2006 Last revised: 15 Sep 2009
Date Written: 2003
The recent expansion of expert liability to third parties with antagonistic interests on the other side of the market entails high financial risks for a whole range of professionals, auditors, accountants, tax consultants, architects, accident insurance experts and analysts in the stock market. What is the reason for this expansion? A concrete contract is written in terms of several language games which simultaneously impose their rules on the agreement. Contract law takes account of the conflicting requirements of three social practices in which the contract always already participates (1) the ongoing interactional relation of the parties, its history and its context, (2) the economic institutions of financing the transaction, (3) most importantly in our context, the social institutions within the productive process in which the contract is embedded. Once third party liability is introduced, the fundamental conflict between contractual loyalty and disinterestedness of expertise is transformed. The third party liability rule changes the asymmetric contractual obligation to the interests of the mandator into a symmetric obligation to the interests of both parties to the project. This creates equidistance to the commercial interests involved and allows the expert to balance their interests against each other. Seen from the perspective of expertise's social function: the second move transforms the expert's obligation to personal interests into his obligation to the project. From this perspective, the following legal issues are discussed: (1) Underlying principle; Should expert liability toward third parties be an implicit dimension of contract or a rule of tort law?
(2) Scope of protected persons: Which principle governs the limits of third party liability?
(3) Conditions of liability: What are the standards of duty of care that are owed to the third party? (4) Restrictions of expert liability? Are defences that the expert can raise against the mandator available to the expert against the beneficiary? Can the expert exclude liability against the beneficiary?
Keywords: expert liability, privity of contract, contractual liability for third parties, contract theory, sociological jurisprudence, legal theory, system theory
JEL Classification: K 10, K 40
Suggested Citation: Suggested Citation