Negligent misrepresentation is defined as follows: one who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in communicating the information. A negligent misrepresentation occurs when one supplies false information for the guidance of others. In other words, a negligent misrepresentation does not lie for omissions; there must be some affirmative false statement.
The buyers filed a case against the sellers for negligent misrepresentation in action arising out of sale of half interest of an Arabian stallion. The sellers contend that they neither negligently misrepresented the condition of the stallion nor gave the the buyers an express warranty regarding the stallion. The court awarded the buyers $ 16,000 in compensatory damages. The sellers appealed the award. The buyers also cross-appealed the award of compensatory damages, punitive damages, and attorney fees to sellers based on expenses from partnership and buyers' slander per se.
Did the sellers negligently misrepresent the stallion?
The court found that the sellers' concealment of the horse's lameness before the sale did not support a claim of negligent misrepresentation because it was not an affirmative false statement, but that the sellers negligently misrepresented that the horse was fit to be shown and breached an implied warranty of fitness for a particular purpose. The trial court's decision to hold the buyers harmless for expenses incurred under the partnership was not error because the sellers should not recover costs incurred under a partnership which the sellers misled the buyers into entering. The trial court erred in awarding $ 16,000 to buyers because that determination did not return the parties to the positions they occupied before the agreement. Although the trial court mischaracterized the sellers' failure to disclose the horse's chronic lameness as negligent misrepresentation, when it constituted fraud, the buyers did not suffer adverse consequences because the remedy of rescission gave them everything to which they were entitled. Because the buyers' statements constituted slander per se, and as actual malice was demonstrated, the award of punitive damages was not error.