As negligent misrepresentation is a kind of fraud where someone gives a false information to another person who later incurs a financial loss or harm, it is considered a serious issue. Unlike intentional fraud, it is enough to show that a person has intentionally or maliciously disclosed false information without the necessity to present the case of knowing lie or deception. The doctrine is not doing that anymore but it is based on negligence, the person should know the information is false or the person does not take enough due diligence to validate the information.
Elements of Negligent Misrepresentation
For a person or organization to be liable for negligent misrepresentation, several key elements must be established:
Duty of Care: Presumably the legal duty or obligation to provide correct information was in place at a certain period. The reason may be either on account of the special nature of the relationship or role (e.g. an accountant, real estate agent), due to official identity or statements, or generally because truthful information being given is expected.
False Information Given: The answer was off or not true. It works equally to the individual who sincerely believed that information, but didn't do appropriate actions to confirm or to ensure that the information is accurate.
Financial Loss Caused: The false data could range from simple miscommunication to business revenue losses. This is mainly done through the method of business or investment forfeits.
Negligence/Failure of Due Care: A person of common sense in such circumstances would have been more sensible to have proven accuracy of the information. It was improper procedures and poor processes that lead to substantiating the information.
Reasonable Reliance: The party who was given such information was of a belief that the information was true which made their actions and subsequent decisions based on this to be correct. Their trust and conformity was justifiable.
The role of negligent misrepresentation in fraud will be analyzed.
The fundamental distinction between negligent misrepresentation and fraud is the mental inducement or intentions of the person false of information. Fraud requires the demonstration of either the deliberate misrepresentation or of the knowledge of falsity/the absence of regard for it. However, this is not the case under the negligent misrepresentation where professional has liability even if he/she thought the information is correct but he did not check the information properly to be sure about its authenticity.
Specifically, negligent misrepresentation includes a broader range of behavior than reckless misconduct, which is intended to target. Even if the harming party is no worse off than the injured one in terms of the financial losses caused by relying upon capabilities, it is still unfair because the other party has nothing to do with the accident.