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International Products Co. v. Erie R.R. Co.

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Brief Fact Summary.

Defendant negligently gave plaintiff the wrong location as to where the latter’s goods were stored. After the goods were destroyed in a fire, plaintiff could not collect insurance because of the negligent mistake.

Synopsis of Rule of Law.

A party is subject to liability if he or she makes a negligent statement knowing it will be relied upon by another party and that reliance proves detrimental.

Points of Law - Legal Principles in this Case for Law Students.

A negligent statement may be the basis for recovery of damage.

View Full Point of Law
Facts.

International Products Company (“International”) (plaintiff) expected a shipment of goods. International intended to store the items in a warehouse once they were received until the items could be reshipped. When the goods arrived, Erie R.R. Company (“Erie”) (defendant) negligently told International that the goods were docked at Dock F in the warehouse. In actuality, the goods were docked at Dock D. Unaware of the truth, International insured the goods on the basis that they were stored at Dock F. The goods were destroyed in a fire. International was unable to collect insurance payments due to the mistake as to where the goods were stored. International brought suit against defendant to recover damages.

Issue.

Whether liability may be imposed upon a defendant for negligent language?

Held.

Yes. International may recover because it detrimentally relied on misinformation from Erie. The judgment of the appellate division is affirmed.

Concurrence.

Discussion.

Liability will only attach when there is a duty to give correct information. Before imposing liability, a court must consider whether there was knowledge that a statement is desired for a serious purpose; that the listener intends to rely and act upon that statement; that proximate loss may occur; and the relationship between the parties make it reasonable that the listener had the right to rely on the statement. Here, Erie gave a negligent answer that was factually untrue upon which International detrimentally relied. This information contributed to International’s financial loss as a result of the fire and entitles them to damages.


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