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27 Loy. L. Rev. 1184 (1981)
Negligent Misrepresentation: A New Trap for the Unwary

handle is hein.journals/loyolr27 and id is 1198 raw text is: NEGLIGENT MISREPRESENTATION: A NEW TRAP FOR THE UNWARY? INTRODUCTION Today, as business people face ever increasing liability in the conduct of their affairs,1 yet another source of potential liability looms on the horizon due to the recognition by the Louisiana courts of a cause of action for negligent misrepresentation2 under Civil Code article 2315.3 Traditionally, negligent misrepresentation has been confined to commercial settings or bargain transactions in which one party relied on information communicated by the other, and thereby suf- fered economic loss.4 There are basic conflicting policies implicit in the debate over whether negligent misrepresentation should be rec- ognized as an actionable tort. On the one hand, there is the general belief that victims suffering a loss because someone's failure to supply correct information should be compensated. This compen- sation is particularly justifiable in those situations in which the de- fendant has profited from his relationship with the plaintiff. On the other hand, acknowledgement of a cause of action raises the spectre of unlimited liability with claims devastating in number and amount crushing the defendant because of a momentary lapse from proper care. Liability could well be excessive, the threat of fraudulent claims seems to be entirely likely, and there is no guar- antee that an effective measure of damages for these cases could be formulated.6 These potential dangers might be overcome if liability were to be limited to situations in which the harm suffered by the plaintiff 1. Perhaps the best example is the movement from caveat emptor to strict liability. 2. Negligent misrepresentation was recognized in Devore v. Hobart Mfg. Co., 367 So. 2d 836 (La. 1979), and in White v. Lamar Realty, Inc., 303 So. 2d 598 (La. App. 2d Cir. 1974). 3. See 367 So. 2d at 839; 303 So. 2d at 601. 4. See United States v. Neustadt, 366 U.S. 696, 706 (1961); RESTATEMENT OF TORTS § 552 (1938). 5. Beeck v. Kapalis, 302 N.W.2d 90, 97 (Iowa 1981) (quoting W. PROSSER, HANDBOOK OF THE LAW OF TORTS § 107, at 708 (4th ed. 1971)). 6. See the discussion of these dangers in J'Aire Corp. v. Gregory, 24 Cal. 3d 799, 598 P.2d 60, 157 Cal. Rptr. 407 (1979). 1184

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