Texas Causes of Action & Affirmative Defenses

Texas Causes of Action & Affirmative Defenses

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Monday, August 31, 2009

Element of reliance: reasonable and justified


REASONABLE RELIANCE ELEMENT

Fraud, fraudulent inducement, negligent misrepresentation, and promissory estoppel all require reasonable and justified reliance upon a misrepresentation or promise. See Ernst & Young, L.L.P. v. Pac. Mut. Life Ins. Co., 51 S.W.3d 573, 577 (Tex. 2001) (fraud); TMI, Inc. v. Brooks, 225 S.W.3d 783, 792, 795 (Tex. App.- Houston [14th Dist.] 2007, pet. denied) (fraudulent inducement); Ortiz v. Collins, 203 S.W.3d 414, 421 (Tex. App.- Houston [14th Dist.] 2006, no pet.) (fraud, negligent misrepresentation, and promissory estoppel).
  
When the parties' written agreement addresses the substance of the oral statement and contains language precluding reliance on external representations, Texas courts find reliance on subsequent oral promises unreasonable. See Simpson v. Woodbridge Props., L.L.C., 153 S.W.3d 682, 684 (Tex. App.- Dallas 2004, no pet.) (holding that disclaimer of reliance clause in contract negated reliance on post contract oral misrepresentations); Atlantic Lloyds Ins. Co. v. Butler, 137 S.W.3d 199, 226 (Tex. App.- Houston [1st Dist.] 2004, pet. denied) (holding that reliance on misrepresentation that was easily refutable with reasonable diligence was not justified or reasonable where two opposing parties were engaged in litigation and negotiating from equal bargaining positions); DRC Parts & Accessories, L.L.C. v. VM Motori, S.P.A., 112 S.W.3d 854, 856, 858-59 (Tex. App.- Houston [14th Dist.] 2003, pet. denied) (holding that reliance on both pre- and post-contractual oral representations, directly contradicted by express terms of contract, was not justified as matter of law); Airborne Freight Corp. v. C.R. Lee Enters., Inc., 847 S.W.2d 289, 297 (Tex. App.- El Paso 1992, writ denied) (finding that written contract containing ample cautionary language precluded exclusive reliance by reasonable businessperson on verbal statements contradicting written agreement).

SOURCE: Biosilk Spa, LP v. HG Shopping Centers, LP (Tex.App.- Houston [14th Dist.] May 8, 2008) (Yates) (fraud, fraudulent inducement, negligent misrepresentation, and promissory estoppel, no reasonable reliance)