Key Takeaways

  • Negligent misrepresentation occurs when false information is provided without reasonable grounds for believing it is true, leading to another party’s harm.
  • A negligent omission is a failure to disclose material facts that one has a legal duty to share, which can also result in liability.
  • Essential elements include a false representation (or omission), lack of due care, justifiable reliance, and resulting damages.
  • Courts often consider the sophistication of the parties involved and the reasonableness of their reliance in negligent misrepresentation or omission claims.
  • Understanding the difference between negligent misrepresentation, omission, and reckless disregard is crucial for determining liability in civil cases.

Negligent misrepresentation elements include untruths and misrepresentations of information. Misrepresentation means that false statements have an effect on a contract of some kind. Misrepresentation involves a single person giving false or inaccurate information to another person, coupled with the justified reliance by another person on such information and the harm that stems from it.

A good example would be telling a person that a new-looking stereo is brand new, when it is five-years-old, and has been used heavily. Negligent misrepresentations are one of three legally-recognized types of misrepresentations under contract law. Negligent misrepresentation means you do not lie directly (meaning saying something you know that’s false), but you made a presentation about an issue while having no reason to believe it to be certain, such as the time Sygenta made a claim that its GMO corn could be offered regarding American-based corn.

Negligent misrepresentation should not appear to be a terrible form of litigation in relations to the intentional variety, but it can cause genuine monetary injuries to a company or individual.

  • Example: An agent is selling a home to a buyer, and the buyer stresses a need for quiet and peace. The agent promises that the property is indeed quiet. However, the house that’s next door is under construction, and the worksite causes a great deal of noise. Even though the agent was not aware of this, the agent made the claim because she assumed it was quiet.

Misrepresentation Elements

Be aware of the following aspects of representation:

  • The representation is stated from a defendant during the course of business, or via a transaction in which he has a pecuniary interest
  • Defendant gives false information in the guidance of another party in regards to the business
  • Defendant does not exercise due competence or care in the communication and acquiring of information
  • The plaintiff suffers loss by relying on the false presentation

Justifiable reliability on the plaintiff’s part occurs when the presentation does not appear to be untrue at face value and that person has no reason to doubt the authenticity of a statement. Such misrepresentations could occur in a number of business cases, ranging from purchase/sale agreements to more complicated transactions in the form of acquisitions and mergers.

To reduce the risks on unknowingly making negligent misrepresentations, or to assess a possible answer if another party has made such misrepresentation to you, you should contact a business attorney who deals in business cases. Statements regarding the future do not count, including salesman-type phrases or opinion. For instance, a car-salesman phrase would include the following:

  • This is a spectacular car
  • The is a fine automobile

Such a representations would have been issued with an intention to entice another party into a contract. In essence, a person has to use a misrepresentation to assist another person in making a deal. Another party should have believed the misstatement and used such information. Most courts remain hesitant in protecting buyers if they do not display some degree of skepticism at what’s being said to them.

  • Example: Attempting to sell a car, the seller assured another person it could run up to a thousand miles an hour, and a buyer believes such a claim.

A buyer should also rely partially on a misrepresentation to decide to proceed with a deal. The reliance of false claims mean that the opposite party suffered a great deal of damage, meaning the buyer must be harmed at the final stage of the transaction. If not, no liability exists.

Negligent Omission and Duty to Disclose

While negligent misrepresentation focuses on providing false information without exercising reasonable care, a closely related concept — negligent omission — involves the failure to disclose important information when there is a legal duty to do so. This duty can arise in various contexts, such as fiduciary relationships, contractual negotiations, or situations where silence would mislead the other party.

To establish a claim for negligent omission, a plaintiff generally must prove:

  1. Duty to Disclose: The defendant had a legal or contractual duty to provide material information.
  2. Failure to Act: The defendant failed to disclose that information, either by oversight or carelessness.
  3. Materiality: The omitted fact was significant enough to influence the plaintiff’s decision.
  4. Justifiable Reliance: The plaintiff reasonably relied on the incomplete information.
  5. Damages: The plaintiff suffered harm as a result of that reliance.

For example, if a company selling a property fails to disclose known structural issues that would significantly affect its value, that failure could constitute a negligent omission. Even though the seller did not make a false statement, the omission of critical facts misled the buyer into entering the contract.

Courts also consider the sophistication and experience of the parties when evaluating claims. A business with extensive resources and access to independent advisors may face a higher burden to show justifiable reliance on incomplete information.

Reckless Disregard

Misrepresentations that are more serious have the same elements, so the lines between them tend to be fine. The sole difference is a false representation requires a reckless disregard of the truth. Further, negligent disregard only mandates no ground in assuming an issue is true, so it boils down to degrees.

  • Example: A buyer says he is lethally allergic to pine wood and asks if there is pine wood in a house. If a seller says there is none, when in truth she did not know what type of wood that the home is made from, then it could constitute reckless disregard of the truth, especially when considering the lethal ramifications if the potential buyer suffers an allergic reaction.

Justifiable Reliance and the Role of Reasonableness

A cornerstone of both negligent misrepresentation and negligent omission claims is the concept of justifiable reliance. The law does not protect parties who ignore obvious warning signs or fail to exercise minimal diligence. Reliance is considered “justifiable” when a reasonable person in similar circumstances would have believed the information (or silence) was accurate and complete.

Courts frequently examine factors such as:

  • Sophistication of the parties: More experienced parties are expected to perform due diligence before relying on representations.
  • Opportunity to investigate: If the plaintiff had access to the relevant information or could have discovered the truth with reasonable effort, reliance might not be justified.
  • Nature of the relationship: A fiduciary or advisory relationship imposes a higher duty of care and increases the likelihood of justifiable reliance.

For instance, in commercial transactions between sophisticated parties, courts often reject negligent omission claims if the plaintiff could have easily uncovered the omitted facts through independent investigation. Conversely, in relationships involving unequal knowledge or trust — such as attorney-client or financial advisor-client relationships — the reliance threshold is lower.

Real-World Examples of Negligence and Omission

Negligent misrepresentation and omission frequently arise in everyday legal disputes. Common scenarios include:

  • Real Estate Transactions: A seller fails to mention water damage or zoning restrictions that affect property use.
  • Business Deals: A company omits critical financial liabilities during a merger negotiation, leading the buyer to overpay.
  • Product Sales: A manufacturer does not disclose known safety defects in a product, causing injury to consumers.
  • Professional Services: A financial advisor neglects to inform a client about the risks of an investment, resulting in significant losses.

These examples demonstrate how both false statements and the failure to speak when required can lead to legal liability. Understanding these distinctions can help individuals and businesses avoid costly disputes and ensure transparency in transactions.

Frequently Asked Questions

  1. What is the difference between negligent misrepresentation and negligent omission?
    Negligent misrepresentation involves providing false information without reasonable care, while negligent omission refers to failing to disclose key information when there’s a legal duty to do so.
  2. Can silence be considered a misrepresentation?
    Yes. If a party remains silent about a material fact they are obligated to disclose, that silence may amount to a negligent omission and lead to liability.
  3. What role does justifiable reliance play in these cases?
    The plaintiff must show they reasonably relied on the false information or omission. If they ignored clear signs or failed to investigate, their claim may fail.
  4. Are sophisticated parties held to a different standard?
    Generally, yes. Courts expect experienced parties to exercise greater diligence, and they may find reliance unjustified if the plaintiff had the means to uncover the truth independently.
  5. How can businesses avoid negligent omission claims?
    They should disclose all material facts during negotiations, maintain thorough records of disclosures, and seek legal counsel to ensure compliance with disclosure obligations.

If you need more information on a negligent misrepresentation elements, submit your legal inquiry to our UpCounsel marketplace. UpCounsel’s attorneys will give you more information on what constitutes a deliberate misrepresentation and what you can do if you fall victim to negligence of any kind. Also, they will defend your rights in court if necessary.