The Elements of Negligent Misrepresentation in Texas

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Misrepresentations occur every day in business transactions. A salesman might say an item is “like new” when in fact it is several years old and has significant wear and tear.

In some cases, a misrepresentation may give rise to a claim for breach of contract or fraud. But there other cases that fall under the category of “negligent misrepresentation.”

When Does a False Statement Become Negligent?

“Negligence” is a term frequently used in tort law. It means that someone violates a legal duty of care they owed another, even if there was no contractual relationship between them. If you drive a car, for instance, you have a duty of care to the other people on the road to operate your vehicle safely.

Negligent misrepresentation occurs when someone recklessly makes a false statement, without a reasonable belief that it is true, for the purpose of inducing you to enter into a business transaction. The Texas Supreme Court has outlined the four elements of negligent misrepresentation as follows:

  1. The defendant makes a representation “in the course of his business” or in pursuit of a transaction where he has a personal financial interest;
  2. The defendant supplies “false information” to “guide” others in their own business;
  3. The defendant failed to “exercise reasonable care” in gathering or disseminating the false information; and
  4. The plaintiff suffered a financial loss due to his or her “justifiable reliance” on the defendant’s representations.

Some important things to keep in mind about these four elements:

  • The false statement must refer to a past or existing fact. Personal opinions and predictions about the future are not grounds for negligent misrepresentation.
  • A false statement is negligent where the speaker has no reasonable grounds for believing it is true. A mistake or accidental omission does not count. But unlike fraud, which requires knowing a statement is false, negligent misrepresentation may occur even if the speaker did not know for sure the statement was false.
  • However, the false statement must be made with the intent of convincing the plaintiff to do something.

What Damages Can I Seek for Negligent Misrepresentation?

If you can prove that you were the victim of negligent misrepresentation, you can ask the court to compensate your losses. This does not include the benefit of any underlying contract arising from the misrepresentation. You can only seek damages for your expenses attributed to your reliance on the defendant’s false statements.

For example, in a 2011 case a Texas appeals court affirmed a negligent misrepresentation award involving a road construction project. The defendant was the engineering firm that prepared plans for the road. The plaintiff was the construction company hired by the state to actually build the road.

Due to numerous false representations in the defendant’s plans, which the plaintiff relied on, the plaintiff was forced to spend an additional $2.4 million to complete the project. The court said the plaintiff was entitled to recover this amount in damages, though it could not seek additional compensation for any “lost profits.”

[RELATED:Negligent Misrepresentation – Texas Statute of Limitations]

Do You Need to Speak With a Dallas Negligent Misrepresentation Attorney?

Negligent misrepresentation cases often involve complex factual and legal disputes. They are not a simple breach of contract action. If your firm has been the victim of misrepresentation or fraud and you need to speak with a qualified Dallas business litigation attorney, contact the offices of Lindquist Wood Edwards LLP today.

 

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