MBE Rules · Torts
Negligent Misrepresentation
Negligent misrepresentation
The rule
A supplier of false information in a commercial transaction is liable for pecuniary loss to the limited class whose reliance was intended, if the supplier failed to exercise reasonable care — narrower than fraud.
In plain English
Negligent misrepresentation occurs when someone provides false information in a business context without exercising reasonable care, leading others to rely on that information. If this reliance results in financial loss, the person who provided the misinformation can be held liable, but only to those who were intended to rely on it.
Worked example
A contractor received a report from a supplier stating that a specific type of insulation was fireproof. Relying on this information, the contractor used the insulation in a new building. When the insulation failed to perform as promised, causing a fire and significant damages, the contractor sued the supplier for negligent misrepresentation. The court found the supplier liable for the contractor's losses.
Memory hook
If you mislead in business, be ready to pay for the fallout!
The trap
Exams often confuse negligent misrepresentation with fraud; students may overlook the requirement of reasonable care versus intentional deceit. They might also misidentify the class of plaintiffs who can recover damages.
How examiners test it
Questions typically present a scenario involving a business transaction where false information is provided, testing the candidate's ability to identify the elements of negligent misrepresentation and the appropriate parties for liability.
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