US: Back to Basics: Privity
Ward v. National Savings Bank, 100 U.S. 195 (1880)
US: Underlying mortgage and title transaction.
Student Contributor: Ally Shuster
Facts: Bank loans money to a borrower who owned a parcel of land and proposed to use it as collateral for the loan. He retains a lawyer to furnish a title report for the bank to rely upon in granting the loan and taking back a mortgage. The Lawyer, who had been hired by the borrower had no contact with the bank but dealt through a mortgage broker. The Lawyer provided a certificate of title stating that the land was “good, and the property is unencumbered.” Before the closing, however, the borrower transferred the lot in fee through a properly recorded conveyance. The borrower defaulted and because the lot was transferred out his name, a foreclosure action would fail. The bank instituted this n action against Mr. Ward, who, admittedly was not its lawyer.
Issue: Even though there was no privity between the Bank and the Lawyer who furnished the title report, could the Bank prevail?
Ruling: In those days--1880, using contract law, the majority found no duty owed because there was no privity between the bank and the borrower's lawyers.
Lesson: While times and the law have surely changed since the Ward case, privity of contract is still an important defense in many states. Today, however, tort concepts such as duty, reliance and other exceptions to the privity rule abound. This case is posted here purely for historical and educational purposes.
Ward shows us where we have come from—there’s no duty owed when there’s no privity, which New York still follows. As the lesson points out, Ward is posted for historical purposes, but I was wondering what other states, besides New York, still use privity as a defense?
I think it's interesting how lawyer's malpractice has it's grounding in so many different legal concepts: torts, contracts etc... I think because of this, it makes it difficult to categorize those with standing simply based off of a contract requirement.
I think that this case shows us how deeply rooted the privity defense is in litigation. I think having the privity defense protects attorneys from being sued by everyone and anyone who is affected by the outcome of a case.
i think today, when looking at things such as the model code, we realize that attorneys do owe a duty to 3rd parties. Even though the person may not be the attorney's client, the attorney may still owe a duty to that person and that person may rely on the attorney to fulfill that duty. Because of the high standard of professionalism and courtesy attorneys must meet, they unlike many other professionals, may owe a duty to 3rd parties who are not their clients. It is interesting to see however how the mode of thinking has changed and advanced with the growth of the profession, from cases like this, to the model code for professional responsibility.
In considering the law and the future of law, it it always important to look back in history to see where the laws came from. Cases that have been overturned and are no longer "current law" are a good starting point for any legal analysis as it explains where the new law originated from.
I find it interesting how some things in society just haven't changed, such as the privity defense. As Ms. Gaedcke stated previously, having the privity defense is one of the fundamental protections available to attorney's, especially in NY.