Introduction
In 1964 the House of Lords in Hedley Byrne & Co Ltd v Heller & Partners Ltd1 expanded liability for negligent misstatement by charting a middle path. The Law Lords rejected a narrow application of Derry v Peek under which the action for deceit required intentional fraud.2 They also rejected a broad application of the general negligence principle of Donoghue v Stevenson3 because they concluded that ‘the law must treat negligent words differently from negligent acts’.4
At virtually the same time across the Atlantic, the law of negligent misrepresenÂtation was changing in very similar ways in the United States.
Courts and scholars increasingly criticised the longstanding restrictive rule of liability and offered variÂous formulations that also mostly sought a middle ground between no liability and liability equivalent to the rule of foreseeability applied in cases of physical injury. In 1965 The American Law Institute adopted §552 of the Restatement (Second) of Torts, which encapsulated the developing thinking and became widely endorsed by courts.Neither Hedley Byrne nor §552 resolved all the issues about the scope of liabilÂity for negligent misstatement, of course. In the United States some courts have continued to adhere to older approaches, the important commercial jurisdiction of New York forged its own path, and some statutes carved out exceptions. Even courts that adopted §552 grapple with the meaning and application of its elements.
1 Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 (HL) (‘Hedley Byrne").
2 Derry v Peek (1889), 14 App Cas 337 (HL). The rule had been reaffirmed in Le Lievre v Gould [1893] 1 QB 491 (CA) and Candler v Crane Christmas & Co [1951] 2 KB 164 (CA), with Denning LJ notably dissenting in the latter case.
3Donoghue v Stevenson [1932] AC 562 (HL).
4Hedley Byrne (n 1) 482 (Lord Reid).
This chapter explores the transformation of the law of negligent misstatement in the United States.[1253] It describes the restrictive approach to liability univerÂsally adopted through the mid-twentieth century, how the developments of the 1960s changed that approach, and what has happened since. It also situates the doctrinal development within broader trends in the law. The changes in law of negligent misstatement reflect transformations in tort law and in the understandÂing of law as public or private. Because law is not autonomous from broader social trends, it also suggests links between the legal change and political and ideological movements.
II.