Bar Exam (Next Generation) Quiz: Negligent Misrepresentation

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Negligent MisrepresentationQuestion 1 of 12

Section 11 of the Columbia Civil Code provides: 'A negligent misrepresentation may be based on a false statement of opinion if the defendant expressly or impliedly represents that she knows facts sufficient to justify the opinion and the opinion is not reasonably supported by facts known or available to her. A prediction of future events is not actionable as a misrepresentation unless it is made as a guarantee and the defendant lacks a present basis for the prediction. Liability is not limited to the person who ordered the information; it extends to a limited group for whose benefit the supplier knows the information will be supplied.'

Marco hired Claire, a licensed structural engineer, to inspect a house he planned to sell. Marco told Claire that her report would be shown to prospective buyers. Claire spent ten minutes at the house and did not enter the crawlspace. Her report stated: 'In my professional opinion, the foundation is sound. This property should continue to appreciate substantially over the next decade.' In fact, termites had caused significant damage to the foundation, which would have been visible had Claire entered the crawlspace. Owen received the report from Marco, relied on it, and bought the house. When the foundation failed, Owen sued Claire for negligent misrepresentation.

Which of the following is the most accurate statement about Owen's claim?

Owen can recover for the foundation opinion but not for the appreciation prediction, because the opinion implied a basis Claire lacked, while the prediction of future appreciation was not made as a guarantee and is not actionable.

Owen can recover for both the foundation opinion and the appreciation prediction because Claire held herself out as a structural engineer and both statements were false and were supplied for Owen's guidance.

Owen cannot recover for either statement because both are statements of opinion, and negligent misrepresentation requires a false representation of fact, not a mere opinion or prediction.

Owen can recover for the appreciation prediction but not for the foundation opinion, because an engineer's professional opinion is not a representation of fact, whereas a prediction about market appreciation is a factual claim about future value.

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Bar Exam (Next Generation) Quiz

Bar Exam (Next Generation) Quiz: Negligent Misrepresentation

Practice Negligent Misrepresentation in Bar Exam (Next Generation) with focused quiz questions that help you check what you know, review explanations, and build confidence with test-style prompts.

What this quiz covers

This quiz focuses on Negligent Misrepresentation, giving you a quick way to practice the rules, question types, and explanations that matter most for Bar Exam (Next Generation).

How to use this quiz

Try each quiz question before looking at the correct answer. Use the explanations to review missed ideas, then come back to similar questions until the pattern feels familiar.

All questions

Question 1

Which of the following is the most accurate statement about Owen's claim?

Owen can recover for the foundation opinion but not for the appreciation prediction, because the opinion implied a basis Claire lacked, while the prediction of future appreciation was not made as a guarantee and is not actionable. (correct answer)
Owen can recover for both the foundation opinion and the appreciation prediction because Claire held herself out as a structural engineer and both statements were false and were supplied for Owen's guidance.
Owen cannot recover for either statement because both are statements of opinion, and negligent misrepresentation requires a false representation of fact, not a mere opinion or prediction.
Owen can recover for the appreciation prediction but not for the foundation opinion, because an engineer's professional opinion is not a representation of fact, whereas a prediction about market appreciation is a factual claim about future value.

Explanation: When a statute defines a tort, its specific language controls. Here, the Columbia Civil Code carves out special rules for opinions and predictions. For an opinion, it's actionable if the speaker impliedly claims to know facts justifying it, and those facts aren't reasonably available. For a prediction, it's only actionable if made as a guarantee and lacks a present basis. Applying this, Claire's statement about the foundation is an opinion, but she impliedly represented she had a professional basis for it. She spent only ten minutes, skipped the crawlspace, and the damage was visible there – so she lacked that basis. Thus, it's actionable. However, her statement about appreciation is a prediction of future events. Since she didn't make it as a guarantee, it falls outside the statute's reach, regardless of her engineering credentials. So Owen recovers for the foundation opinion only. The choice that says "Owen can recover for both" is wrong because it ignores the guarantee requirement for predictions. The choice that says "Owen cannot recover for either" is wrong because it overlooks that opinions implying a factual basis are actionable under the statute. The choice that says "Owen can recover for the appreciation prediction but not for the foundation opinion" gets it backwards – the foundation opinion is actionable, and the prediction isn't. Study tip: When a statute modifies common-law torts, always test each statement against the statutory elements. Ask: Is it an opinion or a prediction? If a prediction, was it guaranteed? This is a classic bar-exam trap.

Question 2

Columbia's Civil Code § 552 provides:

(a) One who, in the course of a business, profession, or employment, or in any other transaction in which the person has a pecuniary interest, supplies false information for the guidance of others in their business transactions is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information if the person fails to exercise reasonable care or competence in obtaining or communicating the information.

(b) Liability under subsection (a) is limited to loss suffered (1) by the person or one of a limited group of persons for whose benefit and guidance the supplier intends to supply the information or knows that the recipient intends to supply it; and (2) through reliance upon it in a transaction that the supplier intends the information to influence or knows that the recipient so intends, or in a substantially similar transaction.

Apex Realty hired Whitfield & Co., a certified public accounting firm, to audit Apex's financial statements in connection with Apex's planned sale of an office building. Apex's CFO told Whitfield: 'We intend to show these statements to a prospective buyer to support the asking price.' Whitfield performed the audit negligently and delivered the statements to Apex. Apex later showed the statements to Beta Properties, the buyer that purchased the building, and also to First National Bank, from which Apex sought a loan secured by the same building. Beta relied on the statements and paid $1 million more than the building was worth. First National relied on the statements in making a $500,000 loan and lost $200,000 when Apex defaulted. Beta and First National both sue Whitfield for negligent misrepresentation.

Which of the following best describes their claims?

Both Beta and First National can recover because Whitfield knew Apex would show the statements to third parties and both relied on the statements in business transactions.
Beta can recover because it was a member of the limited group for whose guidance Whitfield knew the statements were intended; First National cannot recover because Whitfield did not know or intend that the statements would be supplied to a lender. (correct answer)
Neither Beta nor First National can recover because Whitfield supplied the statements only to Apex, and the absence of privity between Whitfield and either plaintiff bars any duty of care.
First National can recover because banks are foreseeable users of audited financial statements, but Beta cannot recover because the purchase was negotiated before the audit was completed.

Explanation: This question tests the scope of liability for negligent misrepresentation under a statute modeled on Restatement § 552. The key distinction is between intended users and merely foreseeable users: liability runs only to the specific person or limited group the supplier knows will receive the information and the specific transaction it is intended to influence. Here, Whitfield knew from Apex's CFO that the audited statements were intended for a prospective buyer to support the asking price. Beta was exactly that buyer, so Beta was within the limited group for whose guidance the statements were supplied. Beta's reliance on the overstated value in the purchase transaction therefore fits the statutory test. First National, by contrast, was a lender Apex approached later. Whitfield never knew or intended the statements to go to a lender, and a loan secured by the building is not the intended sale transaction or a substantially similar one. Mere foreseeability that banks might see audited statements is not enough. The choice saying both can recover because Whitfield knew Apex would show the statements to third parties is too broad—knowledge of some third-party disclosure does not create liability to every third party. The privity-based choice fails because §552 deliberately allows recovery without privity for intended beneficiaries. The choice favoring First National as a foreseeable user misstates the law, and its claim that Beta cannot recover contradicts the facts; Beta was the very buyer Whitfield anticipated. Remember: on negligent misrepresentation questions, look for facts showing the supplier knew the specific recipient and transaction—if only foreseeability exists, there is no liability.

Question 3

In Pirelli v. Dawson, the Columbia Supreme Court held: 'The tort of negligent misrepresentation applies when information is supplied in a business or professional context or in a transaction in which the defendant has a pecuniary interest. A pecuniary interest can exist even without a fee if the defendant supplies information with the expectation of obtaining future business or referrals. Conversely, a statement made in a purely social setting, with no expectation of economic benefit, does not become actionable merely because the listener knows the speaker's profession.'

Maya, a structural engineer, attended a neighborhood barbecue. Tom asked whether his home's foundation could support a second-story addition. Maya, who was not inspecting the property but hoped that Tom would later hire her firm for the renovation work, said, 'I'm sure your foundation can handle it.' Tom relied on the statement, added the second story, and the foundation failed, causing $80,000 in damage. Tom sued Maya for negligent misrepresentation.

Which of the following is the best statement regarding whether Maya had the requisite pecuniary interest?

She did, because she supplied the information with the expectation of obtaining future business from Tom. (correct answer)
She did, because Tom knew she was a structural engineer and reasonably relied on her professional expertise.
She did not, because she did not charge Tom a fee or enter into a contract for her services.
She did not, because the statement was made at a social event, and a social setting can never support negligent misrepresentation.

Explanation: When you see a question about negligent misrepresentation, the critical element to analyze is the defendant's pecuniary interest. The Pirelli rule clarifies that this interest does not require an upfront fee; it can arise from the expectation of future business or referrals. That is the central test you must apply. Here, Maya's statement qualifies because she supplied the information while hoping that Tom would later hire her firm for the renovation work. That expectation of future economic benefit satisfies the pecuniary interest requirement, even though she did not charge a fee at the barbecue. The holding explicitly states that a pecuniary interest can exist without a fee if the defendant anticipates future business. Now, consider the distractors. The choice stating she did because Tom knew she was an engineer and relied on her expertise addresses the separate element of justifiable reliance—it does not create a pecuniary interest on Maya's part. The choice stating she did not because she charged no fee or contract misreads the rule, which rejects a fee as a prerequisite. Finally, the choice stating she did not because it was a social event overstates the law; the court only says a purely social setting with no expectation of economic benefit is insufficient. Here, that expectation existed, making the setting irrelevant. Strategy tip: On the exam, always scan for language indicating the speaker's economic motivation—like "hoping for future work" or "seeking referrals"—to find the pecuniary interest. Don't confuse the plaintiff's reliance or the absence of a formal fee with the defendant's underlying business motive.

Question 4

In Chen v. Hollister, the Columbia Court of Appeals held: 'Negligent misrepresentation requires a false representation of fact. Liability is not imposed for mere silence or nondisclosure in an arm's-length transaction, even if the defendant negligently failed to disclose a material fact, unless the defendant owes a fiduciary duty to the plaintiff. A half-truth is actionable, however, when the defendant volunteers a statement that is misleading because it omits a qualifying fact necessary to make the statement not misleading.'

Rita listed her house for sale. Buyer Dan asked, 'Has the roof leaked in the past three years?' Rita knew the roof had leaked twice and that the roofer she hired had used defective materials. She answered, 'I had the roof replaced last year.' That statement was literally true, but Rita did not mention that the replacement had been defective and that the roof had leaked again after the work was completed. Dan bought the house. The roof leaked again, and Dan sued Rita for negligent misrepresentation.

Which of the following is the best answer?

Dan will not recover because Rita's statement was literally true and she did not make a false representation of fact.
Dan will recover because Rita's statement was a half-truth that was misleading without the omitted facts about the defective replacement and subsequent leaks. (correct answer)
Dan will not recover because the sale was an arm's-length transaction and Rita owed Dan no fiduciary duty to disclose the roof problems.
Dan will recover only if he can show Rita intended to deceive him by concealing the roof problems.

Explanation: When you see a negligent misrepresentation question, remember the key distinction between silence, half-truths, and fiduciary duty. The Columbia rule holds that mere nondisclosure in an arm's-length transaction is not actionable, but a half-truth—a statement that is misleading because it omits a qualifying fact—is actionable. Here, Rita directly answered Dan's specific question about leaks. Her response, "I had the roof replaced last year," was literally true but implied the replacement solved the problem. By omitting that the roofer used defective materials and that leaks continued afterward, she turned a true statement into a misleading half-truth. That omission is the false representation of fact, so Dan recovers. The first wrong answer, "literally true and no false representation," ignores that half-truths count as misrepresentations. The third, "arm's-length transaction and no fiduciary duty," mistakes the rule: while silence alone is protected, a volunteered half-truth is not—no fiduciary duty is needed. The fourth, "only if she intended to deceive," confuses negligent misrepresentation (which requires negligence, not intent) with fraudulent misrepresentation. The lesson: when a defendant speaks but leaves out a material fact that makes the statement misleading, that's a half-truth—actionable even in arm's-length deals. On the exam, look for questions where the answer is literally true but incomplete; that's the classic half-truth trap.

Question 5

A buyer is considering the purchase of a commercial building and asks several advisers for their views. Which statement, if made carelessly and without checking information readily available to the speaker, is most likely to support a tort claim against the speaker?

A structural engineer says, 'In my professional opinion, the building's foundation is sound,' without having inspected the foundation. (correct answer)
A real estate broker says, 'I think this building is a fantastic investment,' without having reviewed the building's financials.
A real estate attorney says, 'The seller will probably accept an offer below asking price,' without having spoken to the seller.
A commercial lender says, 'This building is in a desirable location,' without having visited the neighborhood.

Explanation: This question tests negligent misrepresentation—a tort claim that arises when someone makes a false statement of fact while owing a duty of care, fails to exercise reasonable care in checking that statement, and the listener justifiably relies on it to their financial harm. When you see a professional adviser speaking in their field, ask: did they have a duty to verify before giving an opinion? The structural engineer's statement is the strongest claim. By saying, "In my professional opinion, the building's foundation is sound," the engineer invoked specialized expertise, and the foundation was readily inspectable. Carelessly offering that opinion without inspecting it is exactly the kind of negligence the tort protects against—especially if the buyer relies on it. The broker's "fantastic investment" is classic sales puffery—a vague, optimistic opinion, not an actionable factual statement. The attorney's statement that the seller "will probably accept" an offer is explicitly probabilistic speculation, and real estate attorneys don't normally owe a duty to verify a seller's likely response. The lender's "desirable location" is likewise a subjective opinion, not a verifiable fact, and a lender is not acting as a professional evaluator of neighborhoods. Study tip: distinguish statements of fact from opinions. Negligent misrepresentation requires a false factual assertion, especially from someone with professional knowledge—so focus on the speaker's role and whether they had a duty to check before speaking.

Question 6

A seller of a commercial building told a prospective buyer that the building's HVAC system 'was replaced two years ago.' The seller had never inspected the system and was repeating what a former tenant had said. Before the sale closed, the buyer hired an engineer to inspect the system, but the buyer did not disclose the engineer's findings to the seller. After the sale, the HVAC system failed, and the buyer incurred replacement costs. The buyer sued the seller.

Which additional fact, if true, would most likely defeat the buyer's claim?

The seller had been told by the former tenant, before the sale, that the HVAC system had been replaced two years earlier.
The engineer told the buyer before closing that the HVAC system was more than ten years old and needed replacement. (correct answer)
The buyer negotiated a purchase price below the seller's original asking price before the sale closed.
At the time of the sale, the seller did not know that the statement about the HVAC system was false.

Explanation: Whenever you see a claim based on a seller's pre-sale statement, ask yourself: did the buyer actually and justifiably rely on it? In a misrepresentation claim, reliance and causation are essential. Here, the buyer's own engineer provided the decisive fact before closing: he told the buyer thatthe HVAC system was more than ten years old and needed replacement. Once the buyer knew that, he could not reasonably claim he relied on the seller's statement thatthe system "was replaced two years ago." The sale closed with that knowledge, so the seller's alleged statement did not induce the buyer's decision or cause his replacement costs. That additional fact defeats the claim. The other choices do not have that effect. The fact thatthe seller had been told by the former tenant thatthe system had been replaced two years earlier merely repeats the source of the seller's statement; it does not prove the statement was true, and it certainly does not erase the buyer's independent knowledge. Negotiating a purchase price below the original asking price is just bargaining; a buyer can negotiate hard and still rely on a seller's representations when deciding to close. And the fact thatthe seller did not know the statement was false might negate intentional fraud, but it does not defeat a negligent misrepresentation claim—the seller repeated an unverified tenant assertion as if it were fact—and it also does not change what the buyer knew before closing. In misrepresentation questions, always ask: what did the plaintiff know, and when? Independent knowledge before closing is fatal to reliance.

Question 7

A seller of a small printing business told a prospective buyer, during an email negotiation, that the business had 'no outstanding tax liens.' The seller had received a notice from the tax authority three months earlier stating that a lien had been filed, but the seller had not opened the notice. The buyer relied on the seller's statement and purchased the business. The tax authority later enforced the lien, and the buyer lost money. The buyer sued the seller.

Which legal theory best supports the buyer's claim?

Breach of fiduciary duty
Fraudulent misrepresentation
Negligent misrepresentation (correct answer)
Negligent infliction of emotional distress

Explanation: When you see a misrepresentation question, first identify the defendant's state of mind: did the seller know the statement was false, or was she merely careless? Here, the seller stated "no outstanding tax liens," but a lien had actually been filed three months earlier. She did not open the notice, so she honestly believed her statement was true. That makes her conduct negligent, not fraudulent: she failed to check a document that would have revealed the truth, and she accordingly made a false statement without reasonable grounds for believing it. The buyer justifiably relied on that statement when buying the business and was harmed when the tax authority enforced the lien. Those are exactly this elements of negligent misrepresentation. Fraudulent misrepresentation fails for lack of scienter: thereis no evidence she knowingly made a false statement or intentionally concealed the tax notice—she simply neglected to read it. Breach of fiduciary duty is also wrong because ordinary buyer and seller deal at arm's length, and no fiduciary duty arises merely from a business sale negotiation. Negligent infliction of emotional distress is a nonstarter: the claim concernspurely economic loss from a commercial transaction, not a physical injury or severe emotional shock with physical symptoms. Thus negligent misrepresentation best fits because itcovers honest but careless false statements that induce relianceausing economic harm. Your takeaway: distinguish "knew it was false" from "should have known it was false." The former is fraudulent; the latter,if the seller lacked reasonable grounds for the statement,is negligent misrepresentation. On an exam, look for unopened notices, forgotten emails, or recklessly ignored records—they signal negligence, not intentional fraud.

Question 8

A drug company hired a laboratory to test a new compound. The laboratory's report stated: 'No acute toxicity was observed in the 30-day study.' The report did not disclose that the study used only five animals instead of the twenty required by the testing protocol, and that one of the five animals had died during the study. A project manager had noticed the protocol deviation, but a senior scientist said it was unlikely to affect the results. The drug company gave the report to an investor, who relied on it in deciding to invest. The compound later proved toxic, and the investor lost the investment. The investor sued the laboratory.

Which legal theory best supports the investor's claim?

Breach of contract
Fraudulent misrepresentation
Negligent misrepresentation (correct answer)
Negligent infliction of emotional distress

Explanation: Whenever you see a professional report or statement that someone relied on in a business deal, think misrepresentation. The issue here is whether the laboratory's misleading report supports a tort claim by the investor, who was not the lab's direct client. The best theory is negligent misrepresentation. A lab that supplies information for business guidance owes a duty to exercise reasonable care in preparing that information. The report was misleading: it said no acute toxicity was observed while omitting that only five animals were used instead of twenty and that one had died. In negligence terms, that was a failure to take reasonable care in compiling and presenting the study results, and the investor was a foreseeable person who relied on the report and lost money. Fraudulent misrepresentation requires intent to deceive or reckless disregard for the truth. Here, the senior scientist said the deviation was unlikely to affect results, so the record suggests a mistaken or careless belief, not actual fraud. Breach of contract fails because the investor was not a party to any contract with the laboratory; contract claims need privity. Negligent infliction of emotional distress requires severe emotional harm, often tied to physical injury or a special relationship, not a purely financial investment loss. Study tip: distinguish negligent misrepresentation from fraud by asking whether the defendant knew the statement was false. Without conscious deceit, negligence is the better fit.

Question 9

A manufacturing company sought a loan from a bank. The company's audited financial statements, prepared by a certified public accounting firm, showed a healthy inventory. Relying on those statements, the bank made a loan to the company. The company later defaulted. The bank then learned that the accounting firm had not performed any procedures to verify the inventory figures and that the statements overstated inventory by a substantial amount. The bank sued the accounting firm.

Which additional fact, if true, would most help the bank's claim?

The company's chief financial officer signed the audited financial statements and gave them to the bank.
The accounting firm had provided unqualified audit opinions for the company for each of the preceding five years.
The bank did not review the company's internally prepared financial statements before making the loan.
The accounting firm knew that the company intended to provide the audited financial statements to the bank in order to obtain the loan. (correct answer)

Explanation: This question tests professional liability for negligent misrepresentation. To succeed, the bank must prove the accounting firm owed it a duty of care. That duty extends to third parties only when the professional knows the specific intended use and the third party's reliance. The fact that the accounting firm knew the company intended to provide the audited statements to the bank to obtain the loan directly establishes this duty. With that knowledge, the bank is a 'foreseen' beneficiary, making the firm liable. Without it, the bank is an unknown third party, and under the Ultramares rule, no duty attaches. The CFO signing and delivering the statements shows the client's action, but not the accountant's knowledge of that specific transfer. Past unqualified opinions show a history of service, but don't create a duty to this specific bank for this loan. The bank's failure to review internally prepared statements addresses the bank's own due diligence, not the accountant's knowledge. When a question asks which fact would 'most help' a claim, isolate the missing element. In professional negligence cases, that missing element is often duty—specifically, the professional's knowledge of the intended use and reliance. Look for facts that establish that knowledge.

Question 10

In Jansen v. Northbridge, the Columbia Supreme Court held: 'A claim for negligent misrepresentation requires justifiable reliance. A plaintiff who negligently fails to investigate the truth of a representation may nevertheless recover; the defendant's duty of care is not discharged by the plaintiff's failure to make an independent inquiry. But justifiable reliance is absent when the plaintiff received an express warning that the information was unverified or unreliable and proceeded to rely on it without further inquiry. In that situation, the plaintiff's own decision, not the defendant's carelessness, is the cause of the loss.'

Preston, a sophisticated commercial lender, was considering a $2 million loan to Urban Build LLC. Urban's accountant, Brantley LLP, prepared a financial statement for Urban showing net assets of $5 million. The first page contained a prominent note: 'These financial statements have not been audited; we have not verified any of the client's representations. Lenders must conduct their own due diligence.' Preston saw the note but did not investigate. In fact, Urban's net assets were $1 million, and Brantley had negligently failed to check Urban's bank records. Urban defaulted, and Preston lost $1.5 million. Preston sued Brantley for negligent misrepresentation.

Which of the following is the most likely outcome?

Preston will recover because Brantley owed a duty to Preston as a foreseeable lender and failed to exercise reasonable care in preparing the financial statements.
Preston will recover because a plaintiff's failure to investigate the truth of a representation does not bar recovery for negligent misrepresentation.
Preston will not recover because a sophisticated lender has a duty to protect itself and cannot rely on an accountant's unaudited statement when conducting commercial lending.
Preston will not recover because the express warning on the first page of the financial statement made his reliance unjustifiable and the loss was therefore not caused by Brantley's carelessness. (correct answer)

Explanation: When you see a negligent misrepresentation question, the element to scrutinize is justifiable reliance—especially any facts about warnings or disclaimers. The court's rule here is explicit: a plaintiff's failure to investigate generally does not bar recovery, but an express warning that information is unverified makes reliance unjustifiable. The financial statement contained a prominent note stating it was unaudited and that lenders must conduct their own due diligence. Preston saw this note and did nothing. Thus, his reliance was unjustifiable, and the loss was caused by his own decision to proceed, not by Brantley's carelessness. That is why the correct answer is the one stating Preston will not recover because the express warning made reliance unjustifiable and broke causation. The choice saying Preston will recover because Brantley owed a duty and failed to exercise reasonable care is wrong because duty and breach exist, but the failure of justifiable reliance defeats the claim—the warning exception overrides the general rule. The choice stating Preston will recover because a plaintiff's failure to investigate does not bar recovery is also wrong; that's the general rule, but the express warning triggers the specific exception. Finally, the choice saying a sophisticated lender has a duty to protect itself is tempting, but the court's holding is not based on sophistication—it is based on the express warning. Don't conflate the two. Your strategy: whenever a fact pattern includes a clear disclaimer or warning, immediately check if the plaintiff relied despite it. If so, justifiable reliance is defeated, regardless of the plaintiff's sophistication or the defendant's negligence.

Question 11

Columbia's Civil Code § 552B provides: 'Damages for negligent misrepresentation are (1) the difference between the value of what the plaintiff received and the purchase price or other value given for it; and (2) other pecuniary loss suffered as a direct consequence of the plaintiff's reliance, provided the loss was reasonably foreseeable at the time of the misrepresentation. The plaintiff may not recover the benefit of the bargain, that is, the additional advantage the plaintiff expected if the information had been true.'

Relying on ValuRight Appraisals' negligent appraisal of a warehouse at $1.2 million, Nadia paid $1.1 million for the warehouse. Its true value was $900,000. She had not mentioned to ValuRight a separate catering business opportunity. Because she spent her cash reserves on the purchase, Nadia forwent a contractually guaranteed $50,000 profit from that catering business. She also paid a nonrefundable $10,000 loan-commitment fee required by the purchase agreement, which she would not have incurred had she known the true value. Nadia sued ValuRight for negligent misrepresentation.

What is the maximum amount of damages Nadia is likely to recover?

$200,000, because the only recoverable loss is the difference between the value received and the price paid.
$260,000, consisting of the $200,000 value difference, the $10,000 loan fee, and the $50,000 lost profit, because all three losses were caused by the reliance.
$210,000, consisting of the $200,000 value difference plus the $10,000 loan-commitment fee; the lost catering profit is not recoverable. (correct answer)
$100,000, representing the difference between the appraised value and the purchase price, because the benefit of the bargain is the appropriate measure.

Explanation: Whenever you see a damages question in a negligent-misrepresentation case, start with the statutory measure: the plaintiff gets out-of-pocket loss—value received minus price paid—plus other pecuniary losses that were direct consequences of reliance and reasonably foreseeable at the time. What she does not get is the benefit of the bargain, or the extra gain she expected if the statement had been true. Here, Nadia paid $1.1 million for a warehouse truly worth $900,000, so her out-of-pocket loss is $200,000. That part is common to several choices. She also paid a $10,000 nonrefundable loan-commitment fee only because she went through with the purchase; once the misrepresentation caused the purchase, that fee was a direct, foreseeable pecuniary loss. Total: $210,000. The lost $50,000 catering profit is the trap. Even though Nadia's cash reserves were depleted, she never told ValuRight about that opportunity, so the loss was not reasonably foreseeable at the time of the appraisal. It therefore cannot be added to the recovery, eliminating the $260,000 total. The choice limiting recovery to only the $200,000 value difference is too narrow because the statute expressly permits other direct consequential losses like the loan fee. Finally, the $100,000 option—appraised value minus purchase price—is exactly the forbidden benefit of the bargain: the profit Nadia expected if the warehouse were worth $1.2 million. For exam day, separate out-of-pocket losses from expectation gains, and always ask: was the extra loss foreseeable to the defendant at the time of the misrepresentation? If not, exclude it.

Question 12

At a dinner party, a real estate appraiser told a neighbor, 'The city has already approved rezoning that neighborhood, so the property is worth far more than you think.' The appraiser had not checked the city's records, and the rezoning had not been approved. The neighbor, relying on the statement, bought a house in the neighborhood and later lost money. The neighbor sued the appraiser.

Which additional fact, if true, would most help the neighbor's claim?

The appraiser owned a rental house in the same neighborhood and regularly followed that neighborhood's property values.
The appraiser was providing paid appraisal services to the neighbor and knew the neighbor was deciding whether to buy the house. (correct answer)
The appraiser had made the same false statement to several other guests at the dinner party before speaking with the neighbor.
The neighbor was introduced to the appraiser as a real estate appraiser immediately before the statement was made.

Explanation: Whenever you see a torts question about liability for a false statement, ask: Did the defendant owe the plaintiff a duty of care? A casual social remark rarely creates liability, but a professional giving advice in a business context—knowing the plaintiff will rely on it—does. That's the core issue here: the neighbor suing over a false rezoning claim must show the appraiser had a duty to speak carefully. The correct answer is the one where the appraiser was providing paid appraisal services to the neighbor and knew the neighbor was deciding whether to buy the house. That fact transforms a dinner-party comment into a professional service. Because the appraiser was acting in a business capacity, knew the neighbor would rely on the appraisal, and made the statement without checking records, the neighbor has a strong negligent misrepresentation claim. The paid relationship creates a duty of care, and the knowledge of reliance makes the false statement actionable. Now the distractors: The appraiser owned a rental house in the same neighborhood—ownership shows expertise but not a duty to this specific neighbor; knowing property values generally doesn't mean the appraiser assumed responsibility for advising the neighbor. Making the same false statement to other guests—repetition shows recklessness, but still no special relationship with the neighbor; it doesn't establish that the appraiser owed this plaintiff a duty. Being introduced as a real estate appraiser—that's merely social context; a title alone doesn't create a professional duty unless the appraiser agrees to provide services. Without a paid engagement or explicit assumption of responsibility, the neighbor's reliance isn't justifiable. Study tip: On the bar exam, negligent misrepresentation requires a duty based on a business relationship or professional engagement—look for words like "paid," "consulted," or "provided services." Casual social statements are almost never enough.