Also known as: § 552 · Restatement § 552 · §552 · negligent misrepresentation · Restatement (Second) of Torts § 552
Written by attorneys · grounded in primary & secondary sources — see below
The measure of damages for negligent misrepresentation that compensates the plaintiff for pecuniary loss of which the misrepresentation is a legal cause. Recovery includes the difference between the value of what the plaintiff received and the price paid plus other consequential pecuniary losses from reliance. Recovery excludes the benefit of any contract with the defendant.
Sarah Sullivan purchased an office building from Sterling Dynamics after relying on an appraisal that overstated lease stability. The building proved worth three million dollars less than the ten million dollar price because several tenants had already given notice to leave. Sarah recovers the three million dollar difference as the pecuniary loss caused by the misrepresentation.
Sasha Stone chartered a vessel from Synergy Systems after relying on a condition report that omitted known hull corrosion. The vessel required repairs that forced Sasha to pay higher rates for substitute tonnage. Sasha recovers the repair and substitute costs but cannot recover the operating profits she expected under the charter agreement itself.
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Sophia Singh obtained a copy of an audit report prepared for a bank and relied on it to purchase shares in the audited company. The report contained negligent errors that caused Sophia a pecuniary loss. Sophia cannot recover because the auditor did not intend the report for her use or for a limited group that included her.
Sebastian Santos operated an airline near a rail yard where Consolidated Rail negligently caused a chemical spill. The spill forced flight cancellations and produced direct revenue losses. Sebastian recovers the pecuniary losses that were a foreseeable consequence of the negligence because the airline was within the zone of risk.
Spectrum Financial issued statements about product safety that omitted known risks. Investors relied on the statements and suffered pecuniary losses when the risks materialized. The investors may recover the out-of-pocket difference between the price paid and the value received when the statements are shown to be materially misleading.
Silverline Industries published an article containing negligent factual errors about a public figure's business dealings. The figure relied on the article and incurred pecuniary losses when business partners withdrew. Recovery is limited to actual pecuniary loss shown to be caused by the misrepresentation rather than presumed damages.
A plaintiff recovers the pecuniary loss caused by reliance, including the difference between the value received and the price paid plus other consequential losses. The rule does not permit recovery of the benefit of any contract with the defendant.
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No. Section 552B(2) expressly excludes the benefit of the plaintiff's contract with the defendant, and courts treat expected profits from a third-party contract as non-recoverable expectation damages rather than compensable pecuniary loss.
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A clear disclaimer limiting use to the intended recipient can negate the duty or reasonable reliance needed for recovery. When the report states it is prepared only for a named client and assumes no responsibility to others, third-party reliance falls outside the scope of liability.
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Section 552 limits liability to a limited group of persons for whose benefit the information is supplied. Courts following the Ultramares approach adopt this limit so that auditors are not exposed to liability to an indeterminate class for an indeterminate time and amount.
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…1983, the company filed for bankruptcy. Plaintiffs lost their investment. Plaintiffs sued Arthur Young for negligence, negligent misrepresentation, and fraud. The jury returned a verdict in favor of plaintiffs on the negligence and negligent misrepresentation causes of action. The trial court granted judgment notwithstanding the…