Monday, January 18, 2010
Fraud and Negligent Misrepresentation Cause of Action in Texas
PROVING A CAUSE OF ACTION FOR COMMON-LAW FRAUD AND NEGLIGENT MISREPRESENTATION - WHAT ARE THE ESSENTIAL ELEMENTS UNDER TEXAS LAW?
In order to prove fraud, a party must show that (1) a material representation was made; (2) the representation was false; (3) when the representation was made, the speaker knew it was false or made it recklessly without any knowledge of the truth and as a positive assertion; (4) the speaker made the representation with the intent that the other party should act upon it; (5) the party acted in reliance on the representation; and (6) the party thereby suffered injury. In re FirstMerit Bank, N.A., 52 S.W.3d 749, 758 (Tex. 2001). Fraud by nondisclosure is a subcategory of fraud. See Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 181 (Tex. 1997).
In order to prove negligent misrepresentation, a plaintiff must show that (1) the defendant made a representation in the course of its business, or in a transaction in which it has a pecuniary interest, (2) the defendant supplied “false information” for the guidance of others in their business, (3) the defendant did not exercise reasonable care or competence in obtaining or communicating the information, and (4) the plaintiff suffered a pecuniary loss by justifiably relying on the representation. Henry Schein, Inc. v. Stromboe, 102 S.W.3d 675, 686 n. 24 (Tex. 2002) (citing Fed. Land Bank Ass’n v. Sloane, 825 S.W.2d 439, 442 (Tex. 1991)).
SOURCE: Cash Rent-A-Car v. Old American County Mutual Fire Ins. Co. (Tex.App.- Houston [1st Dist.] Jan. 14, 2009) (Jennings)(conversion, trespass, fraud, negligent misrepresentation, breach of contract and bailment agreement, violations of the Texas Theft Liability Act, the Texas Deceptive Trade Practices Act (“DTPA”), and the Texas Insurance Code)