Reliance on Opinion

Reliance on Opinion

Once a statement is classified as opinion, a new question arises: not whether the words can amount to a misrepresentation, but whether the person who heard them may reasonably act on them. Restatement (Second) of Contracts § 169 answers it. To the extent that an assertion is one of opinion only, the recipient is not justified in relying on it unless the recipient falls within one of three listed circumstances.¹ The rule gives content to the justified-reliance requirement of § 164(1) for this one kind of statement.² The sections above looked at the speaker: what the words assert or imply about the facts and about the speaker's sincerity. Section 169 looks at the listener.

The words to the extent confine the rule to the opinion-only portion of a statement.³ A statement that reports a fact and praises it in the same breath is analyzed in parts: the factual part meets the ordinary reliance inquiry, and only the evaluative part meets the default. The default itself follows from how arm's-length bargaining works. The two sides want opposite things from the deal, so each side's judgment about quality or value is colored by its own stake, and a listener can usually form a judgment of their own once the underlying facts are in hand. A recipient who takes a counterparty's opinion on trust anyway has chosen to bear the risk that it is wrong, and the law leaves that risk with the recipient unless something makes the deference reasonable.

Section 169 names three such things, and they are alternatives. The recipient may (a) stand in a relation of trust and confidence to the speaker that makes reliance reasonable, (b) reasonably believe that the speaker has special skill, judgment, or objectivity compared with the recipient, or (c) be, for some other special reason, particularly susceptible to a misrepresentation of the type involved.⁴ Proof of any one is enough; proof of none leaves the default in place. Each clause describes the recipient's own reasonable position, so a good answer uses facts about the listener: the relationship, what the listener could reasonably believe about the speaker's competence or detachment, and the listener's particular vulnerability. The clauses also track the reason the default exists. An opinion compresses a body of underlying facts, and where the speaker can see those facts and the listener cannot, deference is sensible even between parties on opposite sides of a bargain.⁵

The recognized situations are numerous, and applied consistently they leave the opinion rule a modest obstacle to relief. The classification of a borderline statement as fact or opinion is also often left to the jury, which softens the rule further.⁶ A conclusion that a statement was opinion therefore rarely ends the analysis; it redirects the inquiry to the recipient's situation. Each circumstance has its own subsection, beginning with trust and confidence.

Trust and Confidence

The first circumstance, in § 169(a), applies when the recipient stands in such a relation of trust and confidence to the speaker that relying on the opinion is reasonable.⁷ The clause asks two questions in order. Is the relationship one of trust and confidence? If so, was it reasonable, given that relationship, to rely on this opinion? Such a relationship is often called fiduciary, and it arises when one person has placed trust in another who has accepted and encouraged that trust.⁸ The recognized pairings include attorney and client, principal and agent, insurer and insured, partners, and, in suitable circumstances, members of the same family.⁹

The relationship overrides the default because it removes the premise the default rests on. Section 169 starts from the position that arm's-length bargainers each speak for their own interest, so a listener must discount the other side's view of quality or value.¹⁰ A speaker who has accepted a role as the listener's guide is no true antagonist. The opinion arrives as guidance, and the listener has no reason to suspect that the speaker's own stake has shaped it. A rule requiring independent verification would also defeat the relationship itself: a client who retains a lawyer because the client cannot judge a legal claim can hardly be expected to hire a second lawyer to check the first. The law protects the reliance that the relationship invites.

The lawyer who tells a prospective client that a weak case is strong shows the clause at work. An attorney who believes a prospective client has a weak case on the facts makes a fraudulent misrepresentation by expressing a contrary opinion in order to induce the client to litigate.¹¹ Two features combine to produce that result. The lawyer misstates the opinion the lawyer actually holds, which turns an assessment of the case's strength into a false assertion about the lawyer's own state of mind. And the client, who trusted the lawyer as the person qualified to make the assessment, may reasonably rely on it under § 169(a). Remove the dishonesty, and the statement is an honest opinion. Remove the relationship, and the listener meets the default against relying on opinion. The dishonesty supplies the misrepresentation; the relationship supplies the justified reliance.

Closeness without more falls short of the clause. In Arko v. Cirou, a Georgia appellate court held that a lender's close personal relationship with the borrowers did not establish a confidential relationship.¹² In MAFG Art Fund, LLC v. Gagosian, a billionaire collector sued a dealer and his gallery, accusing them of concealing material information and of undervaluing works when buying them and overvaluing them when selling. The court held that the parties' long working relationship and friendship created no fiduciary duty and that the collector should have done his own due diligence.¹³ In each case the speaker sat on the other side of the transaction, whereas a lawyer gives the client judgment on the client's own side of it. The clause turns on whether the speaker accepted a position as the listener's source of judgment, and friendship shows only affection and familiarity. If shared dinners were enough, the default against relying on opinion would protect only strangers, and a boat sold by an old friend would be treated differently from the same boat sold by an acquaintance with the same interest in the price. Facts that stress years of friendship, frequent contact, or first-name familiarity therefore do not settle the question. The facts that matter show what role the speaker took on.

Read together, the two retirees show the sequence the clause demands. The first question is what role the speaker accepted. Only when a relationship of trust and confidence exists does the second question arise: was relying on this opinion reasonable? It ordinarily is when the opinion concerns the matter the speaker was trusted to handle. A recipient who cannot show the relationship must turn to the other two circumstances, special skill or objectivity and special susceptibility, which the next subsections take up. The same relationship carries a second consequence later in this chapter, where § 161(d) treats nondisclosure as an assertion when the other person is entitled to know the fact because of a relation of trust and confidence between them.¹⁴ The same relationships appear on both lists because their members do not bargain at arm's length.¹⁵

Special Skill or Objectivity

Section 169(b) supplies the second circumstance: the recipient reasonably believes that, as compared with the recipient, the person whose opinion is asserted has special skill, judgment, or objectivity with respect to the subject matter.¹⁷ Three features of the wording control. The comparison is relative: the question is whether the speaker knows more, judges better, or stands further from the outcome than this particular listener, not whether the speaker ranks among experts generally. The three qualities are alternatives, so a speaker who supplies any one of them satisfies the clause. And the belief must be reasonable, which directs attention to the recipient's situation and to what the speaker said or did to create an impression of advantage.

The clause exists because of what an opinion is. An opinion condenses a group of underlying facts into a conclusion, and a listener who cannot reach those facts, or cannot read them, cannot cheaply test the conclusion.¹⁸ The default in § 169 assumes the reverse: a listener able to form an independent judgment, who therefore discounts the counterparty's.¹⁹ When the speaker holds an advantage the listener cannot match, discounting is no longer possible, and the opinion works as a report of the speaker's expertise. A speaker who invites reliance on expertise cannot disclaim responsibility by calling the statement opinion. That is why the rule applies even between antagonists in a bargaining transaction, as when a jeweler states the value of a diamond or a patent attorney states that an invention is patentable.²⁰

A familiar illustration is a seller who makes his living as a mechanic and tells his sister-in-law that the car he is selling has a good engine. The statement is an opinion, but his trade gives her reason to take it as informed, so her reliance can be justified and she may rescind the sale if the engine turns out to be bad.²¹ The family tie strengthens her position, yet the clauses of § 169 are alternatives, and the occupation alone raises clause (b). The result changes when the speaker has no apparent advantage.

Because the clause turns on the recipient's reasonable belief, the recipient need not prove that the speaker was in fact an expert. Courts list among the recognized exceptions to the opinion rule the situation in which the speaker is an expert or claims to be one, and the second half of that formulation fits the clause's focus on the impression the speaker creates.²² A speaker who presents as knowledgeable, by trade, by title, or by the way the opinion is delivered, gives the listener a reasonable basis for the belief, even if the knowledge proves thinner than it looked. A speaker whose real expertise the recipient had no reason to suspect gives the clause nothing to work with, since the recipient held no belief about an advantage. The comparison also runs against the recipient's own competence: a buyer who knows engines as well as the seller cannot reasonably believe the seller knows more. Facts that announce the speaker's credentials therefore leave the analysis unfinished. The open question is what the recipient knew and reasonably believed about them.

Vokes v. Arthur Murray, Inc. shows the clause working for a recipient who had no standard of her own. A dance-studio student alleged that the studio praised her potential and progress to sell her additional hours of instruction. In her telling, she was incessantly subjected to overreaching blandishment and cajolery: assured that she had grace and poise, that she was rapidly improving, and that more lessons would make her a beautiful dancer, and given dance aptitude tests to determine how many more hours she needed.²³ The court recognized that a statement by a party with superior knowledge may be treated as one of fact, although it would be opinion if the parties dealt on equal terms, and it reasoned that the studio could reasonably be supposed to know more than the student about her dancing potential and whether she was improving.²⁴ A beginner cannot rate her own dancing against a standard she has not yet learned, so the studio's judgment was the only informed one open to her. The court also kept the limit in view: where parties deal at arm's length with no inequities or inherently unfair practices, courts generally leave them where they find themselves. It reversed the dismissal of her complaint because the allegations entitled her to her day in court.²⁵

Statements of authenticity in the art market show how the clause sorts speakers. A seller who simply declares a work genuine may be stating only a belief drawn from the available facts, since only the artist or a witness to the work's creation can say with certainty who made it, and the buyer then needs one of the § 169 circumstances to rely. Some states have eased the problem by statute. A 1966 New York law provides that an art merchant who sells a work to a nonmerchant buyer creates an express warranty if, in describing the work, the merchant identifies it with an author or authorship.²⁶ Where no warranty applies, the clause does the sorting. A gallery that presents itself as an authority on the artist invites a reasonable belief in special skill, while an heir selling a painting found in an attic invites none, even though both may use the same words.

Objectivity is a separate quality from skill, and the clause protects reliance on it. A speaker may know no more about the subject than the listener and still deserve more trust, because the speaker has no stake that would tempt a slanted opinion. A recipient may justifiably rely on the opinion of someone reasonably believed to be disinterested in the transaction, provided that the fact that the person holds the opinion matters to the decision.²⁷ Courts also recognize the situation in which a third person poses as a disinterested bystander.²⁸ The reason follows from the premise of the default: the other side's opinions are discounted because the speaker profits from the sale, and a listener who reasonably believes no profit is at stake has lost the reason to discount. The word reasonably lets the clause reach a speaker who only seems disinterested.

Clearing § 169(b) answers only the reliance question. The opinion must still qualify as a misrepresentation, by being an assertion not in accord with the facts, and the recipient must still show that the statement induced the decision to assent.²⁹ The last circumstance in § 169, special susceptibility, comes next.

Special Susceptibility

Section 169(c) supplies the third circumstance in which a recipient may justifiably rely on an assertion of opinion: the recipient is, for some other special reason, particularly susceptible to a misrepresentation of the type involved.³¹ Each part of the clause narrows it. Some other special reason marks it as the residual category, reaching vulnerability that does not come from a relation of trust and confidence under clause (a) or from a reasonable belief in the speaker's superior skill or objectivity under clause (b).³² Particularly susceptible demands more than the ordinary shortfall every buyer has against a seller who knows the goods better. And of the type involved ties the vulnerability to the statement made: a recipient who is unusually open to flattery about personal talent is not for that reason unusually open to a claim about the zoning of a lot. Because the three clauses are alternatives, a recipient who proves this one overcomes the default without proving anything about the speaker's standing.³³

The clause exists because the default it relieves rests on an assumption about the listener. Section 169 starts from the premise that a recipient discounts a counterparty's judgment about quality or value, since each side to a bargain speaks with a stake of its own.³⁴ Discounting works only when the listener can measure the claim against some standard of their own. A recipient who lacks the experience, capacity, or detachment to do that cannot discount, and the remark an ordinary buyer shrugs off becomes the deciding fact in this buyer's reasoning. The law places the cost of that mismatch on the speaker for a structural reason: the speaker can see how the listener is likely to take the words and can avoid the harm by declining to exploit it, while the victim has no equivalent protection. Measuring justification against the actual recipient, and not an average one, follows from that allocation.

The older dance student in Syester v. Banta is the standard picture of such a recipient. Ms. Syester bought a series of lesson contracts and alleged fraud and misrepresentation in the several sales, as well as in the way the studio later obtained releases from her.³⁵ The jury returned a verdict of $14,300 in actual damages and $40,000 in punitive damages. The appellate court found no reason to disturb the jury's conclusion that the studio's concerted, improper effort to obtain the releases was fraudulent overreaching, a predatory play on the vanity and credulity of an old lady.³⁶ A pitch aimed at vanity works by offering judgments about the listener that the listener is eager to believe and cannot test. Age is one recognized reason of the kind the clause contemplates, since a recipient peculiarly susceptible to misrepresentation because of age or other factors fits it.³⁷ A studio better placed than its student to judge her progress also raises clause (b), but the susceptibility ground does not depend on that advantage.

Adan v. Steinbrecher supplies a second illustration. The plaintiff was a gullible young man who played the piano in disreputable resorts and had inherited $40,000 from his mother. The defendant promptly offered to sell him a roadhouse, represented that it was worth $35,000, and advised him not to ask anyone else about it, because other buyers would come and take the bargain.³⁸ The plaintiff made no inquiry and bought, the place proved practically worthless, and he recovered from the defendant.³⁹ A statement of what property is worth is the kind of judgment that § 168(1) classes as opinion, so an ordinary buyer might have been expected to test it.⁴⁰ Adan is a tort recovery that predates the Restatement, so it illustrates the reasoning of clause (c) without applying it. Two facts explain the result. The plaintiff was unusually credulous, and the defendant used his advice against inquiry to keep that credulity from being corrected, a recognized way for a speaker to make reliance without investigation justified.⁴¹

The standard behind both results is primarily subjective. Justified reliance is not the same as contributory negligence, and a recipient who is unusually gullible or ignorant may honestly and justifiably believe a misrepresentation that a normal person would reject.⁴² The principle has an outer limit and an inverse. The limit is that a statement so preposterous, or so plainly contrary to facts the recipient knows, that no rational person of the recipient's intelligence, experience, and education would act on it supports no reliance at all. The inverse is that a recipient with special expertise or experience must use it, and may be unjustified in accepting at face value what an ordinary person without those attributes could accept. The clause therefore cuts both ways: the same optimistic opinion can leave a skilled recipient without a defense while supporting one for an unskilled recipient.

Two decisions described earlier in this chapter show the clause working as a matter of degree. A court held a prospective shareholder's oral forecast that shares priced at $8.00 would be worth $25.00 in a year to be opinion, and the same court held actionable the highly colored and overly optimistic income claims made to a prospective chicken-raising franchisee.⁴³ The factors that separate the two include that the franchise claims were printed in a glossy brochure rather than spoken, that the shareholder had far more business experience than the franchise buyer, and that the franchisor spoke with an aura of expertise as part of a regional selling campaign.⁴⁴ Only one of those factors, the recipient's business experience, belongs to clause (c). The aura of expertise belongs to clause (b), and the brochure bears on how much weight a listener would give the words. Courts weigh such factors together instead of applying a single rule, which is why the clauses overlap on real facts. The experienced investor had the standard he needed to discount a forecast, and the franchise buyer had far less business experience against which to test the printed promises.

A label is not enough. Describing a buyer as elderly or inexperienced invites the conclusion that clause (c) is satisfied, and that conclusion skips the question the clause asks, which is whether this recipient could not test this kind of statement.

Susceptibility should also be kept apart from materiality, because the two use different yardsticks. Materiality is determined from the viewpoint of the maker, while the justification of reliance is determined from the viewpoint of the recipient.⁴⁵ A misrepresentation is material if it would be likely to induce a reasonable person to manifest assent, or if the maker knows that it would be likely to induce the recipient to do so.⁴⁶ The second alternative lets a speaker's knowledge of an idiosyncrasy make a statement material even when a reasonable person would shrug it off, and one who preys on another's known idiosyncrasies cannot complain when the contract is held voidable as a result.⁴⁷ Clause (c) works at a different stage. It asks who the actual recipient was, whatever a reasonable person would have made of the opinion. The speaker's awareness of the vulnerability is not an element of clause (c), although in Syester and Adan the speaker's exploitation of it made the recipient's case strong. Section 169 supplies only the reliance element, so a recipient who clears it must still show a misrepresentation that is fraudulent or material and that induced the decision to assent.⁴⁸