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Under Illinois law, one who in the course of his business or profession supplies information for the guidance of others in their business transactions is liable for negligent misrepresentations that induce detrimental reliance.
Wayne Crawford sought a loan from plaintiff Greycas, Inc. to support his financially ailing farm. Crawford offered to secure the loan with farm machinery and asked his brother-in-law, defendant Theodore S. Proud, a member of the Illinois bar, to prepare a letter stating there were no prior liens on the machinery used to secure the loan. Defendant prepared the letter, although most of the farm machinery had already been pledged to other lenders. Crawford later defaulted on the loan. Plaintiff brought suit against defendant for negligent misrepresentation and prevailed. Defendant challenged the judgment.
Under the circumstances, could the defendant be held liable for negligent misrepresentation?
On appeal, the court affirmed the judgment of the trial court. The court noted that under Illinois law, one who in the course of his business or profession supplied information for the guidance of others in their business transactions was liable for negligent misrepresentations that induced detrimental reliance. In this case, defendant supplied information to plaintiff that was intended to guide plaintiff in commercial dealings with borrower. Defendant therefore had a duty to use due care to see that the information was correct. Plaintiff was not negligent in failing to conduct its own search. One such search was enough to disclose prior liens, and plaintiff acted reasonably in relying on defendant to conduct it.