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Negligent misstatement is a form of negligence. While claims are not often successful, they are often included alongside other claims such as the Fair Trading Act or other consumer laws. Negligent misstatement generally refers to situations where there is a false statement by a person who owes a duty of care to another. Further, the reliance on this false statement causes the latter person financial loss. This article will set out:

  • what negligent misstatement is; and
  • how it works in practice.

What Is Negligent Misstatement?

Negligent misstatement is a form of negligence that is typically quite common in business disputes. While the bar is quite high, it is easy to make a claim that negligent misstatement occurs. It includes instances where:

  • a person or business makes a false or misleading statement to another person or business;
  • a duty of care or special relationship exists between the parties; 
  • the person receiving the statement relied on it in a reasonable way; and
  • that person suffered some type of loss as a result of relying on the false or misleading statement

Negligent misstatement is relatively complicated. Another business or person may raise a claim against you, or you may think that you have suffered loss as a result of relying on someone’s false or misleading words. In that case, you should see a lawyer to get specific advice about whether your situation is likely to amount to a case of negligent misstatement.

There are various different legal considerations. Further, there are a variety of ‘elements’ that must be satisfied or confirmed for a claim to be successful. These usually vary based on the facts and specific circumstances of the situation. For instance, to see whether there was a duty of care or special relationship between parties, a lawyer or court will look at: 

  • the nature of the relationship between you and the other party;
  • whether the consequential problems were foreseeable; and 
  • how close and trusted the other party was to you. 

Similarly, whether it was reasonable to rely on the other party’s statement will change depending on the individual circumstances of your case. 

How Does Negligent Misstatement Work In Practice?

Negligent misstatement can seem a little theoretical or abstract. Therefore, it can be useful to think about how it plays out in practice. In employment law, for example, an employer may give a reference. They know that whoever is receiving the reference will rely on that information when deciding to hire someone for a job. Therefore, the employer is under a duty to use reasonable care to see that the information is: 

  • true; 
  • accurate; and 
  • not misleading. 

An employer who negligently provides untrue or inaccurate information in a reference may be liable for damages. The same possible issues apply to situations where an employer is advertising a job and trying to recruit new hires.

Negligent misstatement can also occur where parties are entering into contracts with each other. It will not apply to every situation where parties are entering into a contract. There needs to be a special relationship between those parties that gives rise to a duty of care. For example, it might arise where there is a partnership agreement between parties, and one partner gets another to enter into a contract based on a claim that is not true. 

Key Takeaways

Negligent misstatement is a form of negligence. It refers to situations where a person or business makes a false or misleading statement to another person or business. Further, the latter relies on the statement and suffers some kind of loss or detriment as a consequence. There needs to be a special relationship or ‘duty of care’ between these parties. Not all false statements will amount to negligent misstatement for this reason. Getting specialist advice from a lawyer is useful if you consider you have suffered as a consequence of someone else’s negligent misstatement. The law is very fact-specific and will apply differently depending on your personal circumstances. If you want to know more about how negligent misstatement works, contact LegalVision’s disputes and litigation lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

What is negligent misstatement?

It is situations there is a false statement by a person or business who owes a duty of care to another person or business, and the reliance on this false statement causes the latter person financial loss.

What is a duty of care in terms of a negligent misstatement claim?

A duty of care refers to when two parties (whether individuals or businesses) have a special relationship which means that one of those parties would be entitled to trust or rely on information provided by the other party. There are lots of legal tests and arguments around when a duty of care applies and when it does not, so there is no simple answer to whether there is a duty of care in any given situation.

What is resulting loss in terms of a negligent misstatement claim?

Resulting loss refers to when the person or business receiving the negligent misstatement suffers some kind of loss or detriment as a consequence of relying on that statement. For instance, if a business can show that it has lost revenue as a consequence, that typically will amount to resulting loss. 

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