Also known as: non-fraudulent misrepresentation · innocent misrepresentation · negligent misrepresentation
Written by attorneys · grounded in primary & secondary sources — see below
A misrepresentation made without the deliberate intent to mislead. It encompasses both negligent misrepresentations made without reasonable care in ascertaining the truth and innocent misrepresentations made without any fault. The maker lacks the knowledge of falsity or reckless disregard required for fraud.
Natalie Norris purchased a commercial property from Norton Bank after the bank supplied an appraisal report stating the building generated stable rental income. The report contained errors that the bank should have caught through ordinary diligence. Norris recovered the difference between the price paid and the property's actual lower value plus the cost of repairs she undertook after discovering the true condition.
Nia Nkosi bought equipment from Neptune Energy after receiving a negligent valuation report that overstated output capacity. Nkosi sought damages measured by the profits she would have earned if the equipment had performed at the reported level. The court limited recovery to her out-of-pocket loss and refused to award the additional profits she expected under the purchase contract.
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Nonfraudulent misrepresentation lacks the scienter required for fraud. The maker does not know the statement is false and does not intend to deceive, though the statement may still be material and induce justifiable reliance that permits avoidance of the contract.
Supporting sources
Recovery is limited to pecuniary loss caused by reliance. This includes the difference between the value received and the price paid plus any additional consequential pecuniary loss. Expectation damages measured by the benefit of the contract are excluded.
Yes. The recipient is barred from recovery if negligent in relying on the misrepresentation.
…See Step-Saver Data Sys., Inc. v. Wyse Tech. , 912 F.2d 643 (3d Cir.1990). [^maj-6]: Step-Saver also advanced claims under negligent misrepresentation and breach of contract theories. Step-Saver does not appeal these claims. [^maj-7]: All three parties agree that the terminals and the program are "goods" within the meaning of UCC § 2-102…