The elements of a claim for negligent misrepresentation are (1) the representation was made by a defendant in the course of his business, or in a transaction in which he had a pecuniary interest; (2) the defendant supplied false information for the guidance of others in their business; (3) the defendant did not exercise reasonable care or competence in obtaining or communicating the information; and (4) the plaintiff suffered pecuniary (financial) loss by justifiably relying on the representation.
Justifiable reliance usually presents a question of fact. But the justifiable-reliance element can be negated as a matter of law (on summary judgment or directed verdict) when circumstances exist under which reliance cannot be justified.
In determining whether justifiable reliance is negated as a matter of law, courts consider the nature of the parties’ relationship and the contract. In an arm's-length transaction, the defrauded party must exercise ordinary care for the protection of his own interests.
A failure to exercise reasonable diligence is not excused by mere confidence in the honesty and integrity of the other party. And when a party fails to exercise such diligence, it is charged with knowledge of all facts that would have been discovered by a reasonably prudent person similarly situated.
Thus, that party cannot blindly rely on a representation by a defendant where the plaintiff's knowledge, experience, and background warrant investigation into any representations before the plaintiff acts in reliance upon those representations.
In Texas, the elements of a claim for negligent misrepresentation include: (1) a representation made by a defendant in the course of business or in a transaction with a pecuniary interest; (2) the provision of false information by the defendant for the guidance of others in their business; (3) the defendant's failure to exercise reasonable care or competence in obtaining or communicating the information; and (4) the plaintiff's pecuniary loss due to justifiable reliance on the representation. Justifiable reliance typically raises a factual question, but it can be negated as a matter of law if circumstances indicate that reliance was not justified. Courts will assess the nature of the relationship between the parties and the contract, and in an arm's-length transaction, the defrauded party is expected to exercise ordinary care for their own interests. A lack of reasonable diligence is not excused by trust in the other party, and a failure to exercise such diligence results in being charged with knowledge of all facts that a reasonably prudent person would have discovered. Therefore, a party cannot justifiably rely on a defendant's representations without appropriate investigation if their knowledge, experience, and background suggest that such an investigation is warranted.
