Tex. Civ. Prac. & Rem. Code § 16.003(a); Restatement (Second) of Torts § 552; PJC 105.4
Negligent misrepresentation in Texas — out-of-pocket only, and the economic loss rule that bars it
A claim in Texas district and county courts · Last verified August 26, 2026
Negligent misrepresentation is the fallback when fraud cannot be proved. It asks whether the defendant was careless with information rather than dishonest, which removes the hardest element of a fraud case.
Two features make it much weaker than fraud, and plaintiffs frequently learn them late. The limitations period is two years, not four. And damages are out-of-pocket only — the claim never pays the profit you expected to make.
What the claim is
A business or professional gave you false information to guide a decision, did not take reasonable care in getting it right, and you lost money relying on it.
Where the right comes from
Common law, adopted from § 552 of the Restatement (Second) of Torts. The leading Texas Supreme Court case is Federal Land Bank Association of Tyler v. Sloane, 825 S.W.2d 439 (Tex. 1991), extended to professionals advising non-clients in McCamish, Martin, Brown & Loeffler v. F.E. Appling Interests, 991 S.W.2d 787 (Tex. 1999).
What a plaintiff has to prove — PJC 105.4
- The representation was made by the defendant in the course of its business, or in a transaction in which it had a pecuniary interest.
- The defendant supplied false information for the guidance of others in their business.
- The defendant did not exercise reasonable care or competence in obtaining or communicating the information.
- The plaintiff justifiably relied on the representation.
- The reliance caused pecuniary loss.
Sloane, 825 S.W.2d at 442.
The second element carries a limit that decides cases: the misrepresentation must be of an existing fact. A promise about what the defendant will do in the future is a contract question, not a tort one.
How long you have to file
Two years, under CPRC § 16.003(a), running from the legal injury. The discovery rule may apply where the injury is inherently undiscoverable.
This is the trap. A plaintiff who assumes the four-year fraud period applies, and files in year three, loses the negligent misrepresentation claim while the fraud claim survives.
What has to happen before you file
Nothing.
What the claim pays
Out-of-pocket damages only. Sloane is explicit: the plaintiff recovers what it spent and lost, not the benefit of a bargain that was never made. Lost profits are unavailable.
No exemplary damages, absent independent proof of fraud or malice.
No attorney's fees.
The damages limit is the reason this claim is almost always pleaded beside something else. On its own, it rarely justifies the cost of trying it.
The economic loss rule
This is the defense that ends most negligent misrepresentation claims. Where the parties' duties and the plaintiff's loss both arise from a contract, Texas requires the claim to be brought in contract.
LAN/STV v. Martin K. Eby Construction Co., 435 S.W.3d 234 (Tex. 2014), applied the rule to a construction project: a contractor could not sue the owner's architect in tort for economic losses caused by defective plans, because the contractor's remedy lay in its contract with the owner. The court's concern was allocation — the parties had a network of contracts that placed those risks, and tort law should not rearrange them.
The claim survives where the loss is independent of any contract, which is why it works against a professional who supplied information to a non-client in a transaction with no contract between them.
Who can be sued
Anyone who supplies information in the course of a business or in a transaction in which they have a pecuniary interest. In practice that means professionals and businesses, not neighbours giving advice over a fence.
The recurring defendants are accountants who prepared statements a lender relied on, appraisers, title companies, engineers, inspectors, and lawyers who supplied information to a non-client.
McCamish, Martin, Brown & Loeffler v. F.E. Appling Interests, 991 S.W.2d 787 (Tex. 1999), holds that a lawyer can be liable to a non-client for negligent misrepresentation, because the claim does not depend on privity — it depends on whether the professional knew the non-client would rely on the information and intended or permitted that reliance.
What LAN/STV added is the limit: where the parties sit in a chain of contracts that allocates the economic risk, the claim gives way even though privity was never required.
Common defenses
- The economic loss rule.
- No justifiable reliance, measured against the plaintiff's sophistication and access to the truth.
- The statement was a promise of future action, not a representation of existing fact.
- The statement was opinion.
- Limitations — two years, and defendants raise it early because plaintiffs often assume four.
- Proportionate responsibility under CPRC § 33.001.
What people get wrong
The deadline is two years, not four. Fraud and negligent misrepresentation are pleaded together and have different clocks.
You cannot recover lost profits. Out-of-pocket loss is the whole measure.
Suing the other side's professional usually fails. After LAN/STV, a party in a contractual chain generally cannot reach across it in tort for economic loss.
Careless is the point. If you can prove the defendant knew the statement was false, plead fraud — it is worth more and lasts longer.
Where it came from
Texas adopted Restatement § 552 in Sloane in 1991, in a case about a bank that told borrowers their loan was approved. The court allowed recovery for the money the borrowers spent in reliance and refused them the benefit of the loan they never got — the out-of-pocket rule, stated at the moment the tort was recognised.
McCamish in 1999 extended the claim to professionals who supply information knowing a non-client will rely on it. LAN/STV in 2014 pulled the boundary back, holding that where contracts allocate economic risk, tort law does not.
Common questions
How long do I have to sue for negligent misrepresentation in Texas?
Two years from the injury. That is shorter than the four years for fraud.
Can I recover my lost profits?
No. Damages are limited to out-of-pocket loss.
Can I recover attorney's fees?
No.
What is the difference from fraud?
Fraud requires that the defendant knew the statement was false or made it recklessly. Negligent misrepresentation requires only that they failed to use reasonable care. Fraud pays more and lasts twice as long.
Why might my claim be barred by the economic loss rule?
Because a contract governs the same subject. If your loss is the loss of what a contract promised, Texas makes you sue on the contract.
Can I sue the other party's accountant or engineer?
Sometimes, if they supplied information knowing you would rely on it and you have no contract with anyone that allocates the risk. After LAN/STV, that is a narrower path than it once was.