A land appraiser prepared an appraisal of a property for a real-estate development company. The appraiser had been told that the appraisal would be used by the company to attract potential investors. Because the appraiser forgot to check the recent changes in the zoning by-laws, the appraisal was not accurate; the investor, a party unknown to the appraiser, was misled about the value of the land and, consequently, suffered a financial loss. On these facts, which of the following is true?

Question

Quizplus · Accepted Answer

The principle of negligent misstatement causing economic loss applies here. The appraiser, through their negligence, did not provide accurate information to the investor, who suffered a financial loss as a result. The investor has the right to sue the appraiser for their negligence. Option A is incorrect as a land appraiser owes a duty of care not only to their client but also to potential investors who may rely on their appraisal. Option C is incorrect as a person can be sued for words that cause loss if they make a negligent misstatement. Option D is incorrect as the principle of caveat emptor (buyer beware) applies in some cases, but it does not apply to situations where a professional has a duty of care to their client or to potential investors. Option E is incorrect as the appraiser owes a duty of care to potential investors irrespective of whether they know the name of the investor or not.

A Land Appraiser Prepared an Appraisal of a Property for a Real-Estate