Justifiable reliance is an important component of many tort and contract claims such as fraudulent misrepresentation ( deceit) negligent misrepresentation, and promissory estoppel in contract. Justifiable reliance refers to a person's justifiable dependence on another's representations. Reliance is not justifiable if another person of similar intelligence, education, or experience would not have relied on the alleged representation.
Restat 2d of Torts, § 537 states a General Rule that
The recipient of a fraudulent misrepresentation can recover against its maker for pecuniary loss resulting from it if, but only if,
(a) he relies on the misrepresentation in acting or refraining from action, and
(b) his reliance is justifiable.
Restat 2d of Torts, § 538 says that
(1) Reliance upon a fraudulent misrepresentation is not justifiable unless the matter misrepresented is material.
(2) The matter is material if
(a) a reasonable man would attach importance to its existence or nonexistence in determining his choice of action in the transaction in question; or
(b) the maker of the representation knows or has reason to know that its recipient regards or is likely to regard the matter as important in determining his choice of action, although a reasonable man would not so regard it
Restat 2d of Torts, § 552, dealing with negligent misrepresentation says that
(1) One who, in the course of his business, profession or employment, or in any other transaction in which he 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 he fails to exercise reasonable care or competence in obtaining or communicating the information.
Justifiable reliance upon a misrepresentation constitutes a critical requirement for strict liability under, § 402B Restat 2d of Torts. Unless the misrepresentation of a particular fact reasonably influences the purchase or use of the product, liability cannot be imposed upon its maker.
Comment j to section 402B declares:
Justifiable reliance. The rule here stated applies only where there is justifiable reliance upon the misrepresentation of the seller, and physical harm results because of such reliance, and because of the fact which is misrepresented. It does not apply where the misrepresentation is not known, or there is indifference to it, and it does not influence the purchase or subsequent conduct. At the same time, however, the misrepresentation need not be the sole inducement to purchase, or to use the chattel, and it is sufficient that it has been a substantial factor in that inducement. (Compare § 546 and Comments.) Since the liability here is for misrepresentation, the rules as to what will constitute justifiable reliance stated in §§ 537-545 A are applicable to this Section, so far as they are pertinent.
The reliance need not necessarily be that of the consumer who is injured. It may be that of the ultimate purchaser of the chattel, who because of such reliance passes it on to the consumer who is in fact injured, but is ignorant of the misrepresentation. Thus a husband who buys an automobile in justifiable reliance upon statements concerning its brakes, and permits his wife to drive the car, supplies the element of reliance, even though the wife in fact never learns of the statements.
Likewise, in Contract law, the doctrine of promissory estoppel encourages fair dealing in business relationships and discourages conduct which unreasonably causes foreseeable economic loss because of action or inaction induced by a specific promise. Justifiable reliance on the representations of another is the gist of this action.
It is a recognized principle that a plaintiff’s full or partial performance of an oral agreement, when done in reasonably justifiable reliance thereon, is sufficient to overcome a statute of frauds defense.