Also known as:negligent misrepresentations · negligently misrepresent · negligent misstatement
Written by attorneys — see sources below.
A tort claim that permits recovery of pecuniary loss suffered in reliance on false information negligently supplied by a person in the course of business or a transaction in which he has a pecuniary interest. The claim requires proof that the defendant failed to exercise reasonable care in ascertaining or communicating the facts. Recovery is limited to out-of-pocket loss and consequential pecuniary harm caused by justifiable reliance.
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How its tested
Common Examples
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Appraiser Overstates Lease Stability
Nile Shipping retained Northstar Logistics to appraise a warehouse before purchasing it. Northstar's report stated that all tenant leases ran for ten years, but the appraiser had only reviewed documents supplied by the seller and never verified tenant intentions. Nile closed the purchase at a price reflecting the stated lease terms. After closing, several tenants terminated early, and an independent valuation showed the property was worth three million dollars less than paid. Nile recovers the difference in value as the pecuniary loss caused by reliance on the report.
Consultant Overstates Production Capacity
Nobel Dynamics retained Nightingale Healthcare to evaluate an industrial bakery it planned to buy. Nightingale's report stated the production line ran at twelve thousand units per hour. Nobel paid a price reflecting that capacity. In fact the line averaged only seventy-five hundred units and required one point four million dollars in repairs. Nobel recovers the repair costs and the difference between the price paid and the actual value received but cannot recover the profits it would have earned had the line performed at the stated rate.
Nancy Nelson listed her home for sale through a broker. The broker's inspection report omitted extensive foundation cracks that a competent inspection would have revealed. Norman Nash purchased the home in reliance on the report. After closing, the cracks caused flooding that required substantial repairs. Nash recovers the repair costs as pecuniary loss caused by reliance on the negligent report.
Accountant Supplies False Audit Data
Nia Nkosi, an accountant, prepared an audit for a client knowing the report would be shown to investors. The audit contained material errors that a reasonable accountant would have caught. Nina Nielsen invested in reliance on the audit and lost her entire investment when the errors came to light. Nielsen recovers her out-of-pocket loss from Nkosi.
Publisher Issues Inaccurate Guide
A publisher released a guidebook containing erroneous descriptions of safe hiking trails. Nicole Navarro relied on the guide while planning a trip and suffered injuries when she followed a misdescribed route. Navarro recovers medical expenses and lost wages as pecuniary loss caused by reliance on the negligent publication.
Manufacturer Misstates Product Safety
A tobacco company issued marketing materials stating its products posed no serious health risk. Nyah Ndlovu began smoking in reliance on those statements and later incurred substantial medical expenses. Ndlovu recovers the medical costs as pecuniary loss caused by reliance on the negligent misrepresentations.
5 common questions
Students Frequently Ask...
What damages are recoverable for negligent misrepresentation?
Recovery is limited to the difference between the value received and the price paid plus any additional pecuniary loss that is a legal consequence of reliance. The plaintiff cannot recover the benefit of any bargain or expectation damages.
Supporting sources
Does a recipient's own negligence bar recovery?
Yes. A plaintiff who is negligent in relying on the misrepresentation cannot recover for the resulting pecuniary loss.
Supporting sources
When does a professional owe a duty to a nonclient for negligent misrepresentation?
A duty arises when the professional supplies information in the course of business knowing it will be used by a limited group of persons for a specific transaction and the nonclient is within that group.
How does negligent misrepresentation differ from fraud?
Fraud requires scienter or reckless disregard for the truth while negligent misrepresentation requires only a failure to exercise reasonable care in ascertaining or communicating the facts.
Can emotional distress damages be recovered?
No. Recovery is confined to pecuniary loss. Emotional distress is not compensable under a negligent misrepresentation claim.
385 U.S. 374 (1967)
…to verify the accuracy of every reference to a name, picture or portrait. In this context, sanctions against either innocent or negligent misstatement would present a grave hazard of discouraging the press from exercising the constitutional guarantees. Those guarantees are not for the benefit of the press so much as for the benefit of all…