Academic journal article Journal of Accountancy

Client Can Recover Purely Economic Damages in Negligence Case

Academic journal article Journal of Accountancy

Client Can Recover Purely Economic Damages in Negligence Case

Article excerpt

An Illinois appellate court ruled a client could recover purely economic damages in a negligence case against an accounting firm without bringing a breach of contract action against it.

The client alleged the firm had failed to perform accounting services and had negligently failed to prepare corporate income tax returns for three years. At trial, the accountant testified he never had prepared the 1985-87 corporate income tax returns for the client but had prepared personal income tax returns for those years. The accountant assumed he had been fired by the client because a client representative had sent him a note expressing displeasure over a mistake in some of the tax forms he had prepared.

The accountant asserted he had never been told by the client or its representatives that he had been terminated during the period. In fact, he contended he had continued to do all the client's accounting work except for the annual corporate income tax returns. It was not until May 1988 that the client sent a letter to the accountant terminating his services. …

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