Contracting out Liability for Negligent Pre-Contractual Misrepresentation

Abstract

This article examines the extent to which entire agreement clauses (EACs) and non-reliance clauses (NRCs) are enforceable to preclude actions for negligent pre-contractual misrepresentations. It is argued that courts could improve legal certainty and contractual fairness by adopting two distinct legal rules to be applied, respectively, to contracts between sophisticated parties and in adhesion contracts. First, it is suggested that in contracts between sophisticated parties only specific contractual barriers to actions should provide a complete defence against negligent misrepresentation claims. Under this rule, the exclusionary effect of EACs and NRCs would be achieved only if an express term of the contract contradicts or is inconsistent with the pre-contractual statement on which the plaintiff bases their tort claim. Second, it is proposed that in contracts of adhesion EACs and NRCs should be regarded as presumptively unconscionable and therefore not enforceable by courts to preclude tort claims for negligent misrepresentation. This presumption would preclude sophisticated parties from using EACs and NRCs as a shield against tort claims for negligence misrepresentations, thereby incentivizing them to enhance the clarity of pre-contractual communications.

Keywords: non-reliance clauses, freedom of contract, contractual fairness, negligent misrepresentation, concurrence contract and tort, unconscionability

JEL Classification: K12