## Facts

- Defendants were sellers under a land sale contract for a subdivision development; plaintiffs acquired the buyer’s interest by assignment and invested in the project.
- During negotiations over the assignment and project terms, plaintiffs alleged defendants represented that, after total payments of $200,000 under the contract documents, defendants would release deeds to certain lots without requiring resale of those lots to third-party purchasers.
- Plaintiffs alleged they relied on defendants’ explanations about when and how lot deeds would be released and structured financing and participation in reliance on those statements.
- Defendants later refused to release deeds unless both the payment amounts were made and the lots were resold to third parties, contrary to plaintiffs’ understanding.
- Plaintiffs sought damages for purely economic losses; there was no claim of personal injury or physical damage to property.
- At trial, the court directed a verdict for defendants on fraud; the jury found for plaintiffs on negligent misrepresentation.
- The trial court granted defendants a new trial based on an erroneous damages instruction; the Court of Appeals reversed and reinstated the negligent misrepresentation verdict.
- The Oregon Supreme Court granted review to decide whether negligent misrepresentation was substantively available on these facts.

## Issues

1. Whether defendants in an arm’s-length real estate development negotiation owed plaintiffs a duty of care sufficient to support negligent misrepresentation liability for purely economic loss.
2. Whether Oregon recognizes negligent misrepresentation causing economic loss only when a “special relationship” exists between the parties.

## Decision

- The Oregon Supreme Court reversed the Court of Appeals’ reinstatement of the jury verdict for plaintiffs on negligent misrepresentation.
- The court held that Oregon permits recovery for some negligent misrepresentations causing economic loss, but only where the defendant owes a duty of reasonable care arising from a special relationship.
- The court held no special relationship existed here because the parties negotiated at arm’s length to advance their own economic interests.
- The case was remanded for further proceedings on remaining matters not resolved by the negligent misrepresentation ruling.

## Legal Principles

- Purely economic loss in tort requires a threshold duty analysis that is more restrictive than negligence claims involving personal injury or property damage.
- Negligent misrepresentation may be actionable for economic loss when a duty to exercise reasonable care in supplying information exists, consistent with a limited reading of Restatement (Second) of Torts § 552.
- A “special relationship” creating a duty of reasonable care arises when one party undertakes to further the other’s economic interests or provides professional or advisory guidance of the type associated with fiduciary or quasi-fiduciary roles.
- In ordinary arm’s-length commercial negotiations, parties generally owe a duty of honesty (avoiding fraud), but not a tort duty to use reasonable care in making statements, absent a special relationship.
- Tort liability for negligent misrepresentation should not be used to convert failed contractual expectations from adversarial bargaining into negligence claims.

## Conclusion

The court held that, although Oregon recognizes negligent misrepresentation in limited settings, plaintiffs could not recover purely economic losses because the real estate transaction was an arm’s-length negotiation lacking a special relationship that would impose a duty of reasonable care in defendants’ representations.


Onita Pac. Corp. v. Trs. of Bronson, 315 Or. 149, 843 P.2d 890 (Or. 1992)