What Is The Penalty For Lying To Customers And Business Associates? (2024)

What Is The Penalty For Lying To Customers And Business Associates? (1)

There is truth, there are lies, and then there is the special mix of reckless optimism and implausible tales that makes business school happy hour fun. It would be an exaggeration to say that every lie you tell in the context of your job can get you fired or sued. For example, if a prospective client of your company asks you if you would like to go on a date to Oktoberfest with him this Saturday, it is appropriate to say, “I would love to, but I have to take my pet chinchilla to the vet,” or better yet, “no thanks, I’m married,” even if you are, in fact, single and chinchilla-less. If your lies or inaccurate statements cause someone else to lose money, however, the wronged party has the right to sue you for negligent misrepresentation. If a client or former business associate is accusing your company of financially harming them through misrepresentation of fact, contact a Washington DC small business lawyer.

What Is Negligent Misrepresentation?

Negligent misrepresentation is a type of fraud. It occurs when one party’s untrue statements cause another party, who relied on those statements to lose money. In order for a plaintiff to prevail in a negligent misrepresentation case, the plaintiff must prove all of the following:

The defendant’s untrue statement related to a material fact, not an opinion
The defendant had no reasonable basis for believing that the statement was true
The plaintiff reasonably relied on the defendant’s statement
The plaintiff suffered financial losses as a result of their reliance on the statement

As with other civil lawsuits involving fraud, plaintiffs face an uphill battle in negligent misrepresentation cases. This is because most of the untrue statements in the business world do not meet the legal definition of representations of material fact. For example, advertising superlatives and sales puffery fall within the definition of opinion, as do speculative predictions about the future. Saying that a car is the “best” is subjective, and car manufacturers can only measure a car’s previous fuel efficiency and predict its future fuel efficiency, so saying that the car is the “most fuel efficient” is a matter of speculation. The court will also rule against the plaintiff if it determines that the plaintiff was too quick to rely on the defendant’s statement and could have easily figured out that the statement was not credible.

You can still be liable for negligent misrepresentation if you thought that the statement was true, but you made an egregious error in doing so, in other words, if you reasonably should have known that the statement was false. Along these lines, a store owner can be liable for premises liability in a slip and fall case if she thought that the floor was dry but reasonably should have known that it was wet, meaning that she could have found out by walking up and down the aisles or installing a security camera.