Negligent Misrepresentation as Contract

Abstract

NEGLIGENT MISREPRESENTATION AS CONTRACT Mark P. Gergen * This article argues negligent misrepresentation is best understood as a contractual claim akin to promissory estoppel with its gist being invited reliance. This taxonomic claim may seem hopeless for the problem is treated as one of tort in the United States and everywhere else in the common law world. I argue this is an unfortunate byproduct of classical theories of contract and the idealization of contract as private legislation. It is unfortunate because the rise of the modern tort of negligence, which has at its heart a principle of liability for harm carelessly caused, creates a risk that negligent misrepresentation will be subsumed into a general tort of negligence. This will change the nature of the liability in significant ways that ought not be allowed to happen as a byproduct of classification of the claim as a species of negligence. This article also is a history of legal theory and arguments about the best theories of contract, tort, and negligence. A long and broad view on these arguments highlights a phenomenon that theorists who focus on a specific field generally overlook. The best theory to account for the core of a field of law generally does a poor job of explaining the periphery. Modern variations on classical theories of contract, such as a promise-based theory, brilliantly account for the core of contract law. The theory of negligence as liability for harm carelessly caused brilliantly accounts for the core of negligence law. But both theories fail in explaining the periphery of their respective fields of law. The negligence principle is too general and open- ended and it unhelpfully effaces the morality of the common law. Promise- based theories of contract are too parsimonious and constrictive. They tend to reduce contract to perfect circle of private legislation. Treating negligent misrepresentation as a problem of contract pushes back against both of these tendencies. Contents I. Introduction and overview 2 II. Negligent misrepresentation: an obligation of invited reliance 6 III. The history of negligent misrepresentation 12 A. Glanzer v. Shepard: a contract in all but name 12 B. Classical theories of contract constrict the field 14 1. Llewellyn and Beale 14 Professor, Berkeley Law School. Earlier versions of this paper were presented at workshops at Berkeley Law School and UCLA Law School.