Negligent Misrepresentation CASES
In English law, negligent misrepresentation arises where a false statement is made carelessly, without reasonable grounds for belief in its truth, and another party relies on it to their detriment.
Definition and principles
Negligent misrepresentation sits between fraudulent and innocent misrepresentation. The maker of the statement does not intend to deceive, but fails to take reasonable care to ensure the statement is accurate.
Liability may arise under common law principles (often linked to a duty of care) and under statute, most notably section 2(1) of the Misrepresentation Act 1967, which reverses the burden of proof so that the representor must show they had reasonable grounds for belief.
Common scenarios
- Pre-contract statements: Incorrect information given during negotiations that induces the other party to enter the contract.
- Professional advice: Statements made by professionals where carelessness leads to reliance and loss.
- Commercial transactions: Misstatements about financial position, assets, or contractual rights.
Legal requirements
Although the precise test depends on the legal basis relied upon, negligent misrepresentation generally requires:
- a false statement of fact (or law),
- made without reasonable care,
- intended to induce reliance or made in circumstances where reliance was foreseeable, and
- actual reliance causing loss.
Practical importance
Negligent misrepresentation is significant because it can give rise to rescission of the contract and damages, even where there was no dishonesty. It plays an important role in regulating pre-contractual behaviour and allocating risk where inaccurate statements influence commercial decisions.
