By Ian Ross
(Originally featured by The Florida Bar Journal at https://www.floridabar.org/the-florida-bar-journal/reframing-the-question-why-florida-courts-should-enforce-nonreliance-clauses/)
“If you tell the truth, you don’t have to remember anything.” — Mark Twain
A nonreliance clause is an agreement by a contracting party that it is not relying on any representations other than those set forth in the contract. Stated differently, a nonreliance clause means that a party has acted on its own, free of influence or interference from its counterparty. Although nonreliance clauses are increasingly used by parties in complex commercial contracts and securities transactions, these clauses are not always enforced by courts, and parties are often cautioned by their attorneys that these clauses may not prevent a subsequent lawsuit in an investment gone wrong.
Consider this example: A promising Florida company is raising money. A wealthy investor flies in. He tours the company’s facilities and has lunch with management. A young vice president tells the investor that the company recently developed computer software that should boost its revenue over time. Days later, after reviewing the company’s financial statements, the investor decides to invest.
As the attorneys negotiate a subscription agreement, the company’s attorneys insist on a comprehensive nonreliance provision. Under the provision, the investor agrees that, except for the specific representations made in the agreement, it is not relying on any other representation made by the company. The investor releases the company from any claim relating to any oral representations not embodied in the agreement. The subscription agreement does not mention the computer software.
Two years later, the company is struggling. Revenue has not increased, and the company’s computer software was less popular than anticipated. The investor files suit, claiming the investor was defrauded. The company meets with its counsel and asks whether it can have the lawsuit dismissed based on the nonreliance provision in the subscription agreement. “Well,” counsel begins, “that’s a complicated question….”
Florida courts have historically tried to balance two competing policy goals when deciding whether to enforce a nonreliance provision. First, courts have consistently recognized that they should respect parties’ freedom of contract — especially when the parties are sophisticated — and enforce contracts as written.1 Second, courts have identified the public policy goal of preventing parties from trying to “contract against their own fraud.”2 The tension between these competing principles has been recognized but not resolved; the result is a body of well-reasoned decisions that nonetheless provide companies with little clarity regarding when and how a nonreliance provision will be enforced.3
This article offers an alternative framework for evaluating the enforceability of nonreliance clauses in fraud cases. Rather than focusing on the primacy of freedom of contract or the public policy justifications for refusing to enforce certain contracts, courts should reframe their evaluation of nonreliance clauses around the question of reliance. Reliance is a legal element unique to fraud-based claims that asks whether the defendant’s misrepresentation induced the plaintiff to believe it. Specifically, reliance focuses on the duties the parties agree to owe to one another in a transaction.
Every transaction presents risk. In the scenario above, the investor may worry that he is being lied to, that the company may not intend to perform under the contract, or that the company simply is not as competent as the investor hopes. The company has its own concerns: The investor may be too focused on a bit of puffery or optimism expressed during diligence by one of its executives, or as time passes and memories fade, may remember such a statement differently than it was intended at the time. Both parties likely want to guard against the possibility that, if their deal goes bad, one will look to blame the other. When that moment arrives, human nature comes with it. Suddenly, the investor may remember that bit of optimism expressed during diligence as the statement that induced it to invest, or the investor may look to past negotiations and decide that some additional duty of disclosure was owed to it. If a dispute arises, both sides will look back to their negotiations, back to their agreement, and years later try to redefine the duties that they owed to one another.
A written nonreliance provision — one that identifies the specific representations relied upon and limits reliance to those specific representations — allows the investor and the company to decide how to allocate these risks among themselves, and to define their duties to one another. In this sense, a court considering whether to enforce a nonreliance provision is not simply deciding a question of contract, because the parties, by negotiating that provision, have defined their own relationship in tort as well. negotiating the specific representations the seller has made, the parties have identified for the court the representations the buyer wanted to ensure were accurate. Additionally, by negotiating the terms of the buyer’s reliance, they have defined the limits of any relational harm that the buyer can later claim it suffered. If courts reframe this enforceability question around the element of reliance, they may find a firmer and more defensible pathway toward enforcing parties’ allocations of the risks of a future dispute how they see fit, by disclaiming reliance beyond specifically identifiable representations.
Reframing the Question: What We
Mean When We Say “Reliance”
A fraud claim requires a plaintiff to prove that 1) a defendant made a misrepresentation (or omission) of material fact to the plaintiff; 2) the misrepresentation (or omission) was intentional;4 3) the plaintiff relied on the misrepresentation (or omission); and 4) the plaintiff suffered damages as a result of the misrepresentation (or omission).5 The third element is commonly referred to as “reliance.”6
Courts often note that reliance, which involves a consideration of whether the misrepresentation at issue led to a plaintiff’s decision to enter a contract, can be understood as an aspect of causation. For example, in securities cases, courts distinguish between transactional causation — whether the alleged fraud caused the plaintiff to purchase the security — and loss causation — whether the alleged fraud caused the plaintiff’s loss. Reliance, courts find, fills the place of transactional causation: “[R]eliance focuses on the front-end causation question of whether the defendant’s fraud induced or influenced the plaintiff’s stock purchase.”7 Courts also compare reliance to causation outside of the securities context, explaining that reliance occurs when a misrepresentation is “an immediate cause of [a plaintiff’s] conduct, which alters his legal relations,” and when, absent such representation, “he would not, in all reasonable probability, have entered into the contract or other transaction.”8
Although proving reliance in a fraud claim is structurally similar to proving the “but for,” or transactional, causation link in a negligence claim, conceptually, reliance is asking something else.9 As the U.S. Supreme Court found in Erica P. John Fund, Inc. v. Halliburton Co. , 563 U.S. 804 (2010), “when considering whether a plaintiff has relied on a misrepresentation, we have typically focused on facts surrounding the investor’s decision to engage in the transaction.”10 This focus on the investor’s decision, and how it was made, turns on the representations made to the investor and the care with which those representations were made.11 Implicitly, reliance assumes that a defendant making a representation that may induce a plaintiff’s investor has a duty of care to make those representations truthfully — the duty of care that exists between two parties in a fraud claim, then, is not entirely different than the duty of care in other tort claims. In a negligence claim, for example, we ask if X owes Y a duty of care. The reliance element in a fraud claim implies that X owes Y a duty to tell the truth when he or she speaks.12
Stated differently, when common law assumes that a plaintiff relied on someone else’s representation, the idea is that the other person had a right to count on the person to tell the truth and fulfill their duty.13 In a recent law review article, “The Place of Reliance in Frauds,” the authors suggest that the question of whether a plaintiff has been defrauded is akin to whether he or she is a victim of trespass:
To defraud someone is to trick them by means of misrepresentation into making a decision that they would not otherwise have made. If the tricking of the victim does not occur, the particularly legal wrong of fraud — of one person defrauding another — has not taken place, even if the victim is injured in some other manner as a result of the trick. Just as the law of trespass sets a relational directive that says, roughly, “do not invade another person’s property,”…fraud is built on a relational directive requiring one to refrain from deceiving another to his or her detriment by intentionally making a misstatement.14
A plaintiff trying to demonstrate reliance, in this sense, is trying to prove that it allowed the defendant to enter its decision-making process, and that the defendant failed to participate honestly in that decision-making process.
More reductively, then, to rely is to trust, and to be defrauded is to have that trust violated. Social scientists note that trust in business transactions — in all transactions, for that matter — is “simply a bet.”15 To trust a counterparty is to bet that the counterparty has the same goals as you, that the counterparty values truth in the same way you do, and that you can count on them telling the truth.16 To trust a counterparty is also to recognize the obvious — that you may be unable or unwilling to investigate every aspect of a business opportunity or investment, and that you will need to accept some level of risk when making this decision.17
If we understand reliance as a form of a bet, in which both sides have some risk — risks that the parties may understand their obligations differently, or may later remember the promises made to each other differently — then we can better understand why parties would want the ability to bargain the limits of the purchaser’s reliance. The parties may want to decide for themselves who is going to hold the risk in a transaction. Why allow parties to take this risk? As David DeSteno writes in his book, The Truth About Trust, “[t]he short answer is that we have to. The potential benefits from trusting others considerably outweigh the potential losses on average.”18 Dealmaking can only occur when parties trust one another; parties cannot afford to spend the time, money, and effort to confirm every facet of a transaction and cannot afford to assume the risk that recollections of the deal years later will remain intact. As Delaware courts have observed, “[b]y specifying the information on which they have relied, parties minimize the risk of erroneous litigation outcomes by reducing doubts about what was promised and said.”19 Reliance, in this sense, is yet another aspect of “contract risk” to be allocated between the parties, and to be enforced by courts in the same manner as any other bargained-for provision between the parties.
The Wrong Question: Can a Party
Contract Against Its Own Fraud?
Traditionally, the enforceability of nonreliance and waiver clauses is treated as a question that straddles the tension between freedom of contract and the sense that a party should not be able to contract away its own fraud. The majority of courts in the United States will enforce nonreliance clauses.20
In Florida, however, the question is more complicated.
The Florida Supreme Court in Oceanic Villas v. Godson , 4 So. 2d 689, 690 (1941), recognized that “[i]t is well settled that a party cannot contract against liability for his own fraud.”21 It refused to enforce an early form of nonreliance clause, finding that, “[t]o hold that by the terms of the contract which is alleged to have been procured by fraud, the lessor could bind the lessee in such manner that lessee would be bound by the fraud of the lessor would be against the fundamental principles of law, equity, good morals, public policy and fair dealing.”22 Nonetheless, Oceanic Villasacknowledged that a nonreliance clause might be used as evidence that neither party had relied on the other’s representation and, thus, evidence that no fraud had been committed.23 Moreover, the Sixth Circuit Court of Appeals, in a case interpreting Florida law, held that Oceanic Villas did not preclude enforcement of a nonreliance clause insofar as a plaintiff may, as a result of a nonreliance clause, be unable to prove the elements of a fraud claim.24
Although some Florida courts have found that Oceanic Villas prevents a defendant from using a nonreliance clause to dismiss a fraud claim,25 others have continued to enforce nonreliance clauses, holding that a plaintiff cannot prove reliance or that the nonreliance clause extinguishes the prior representation.26 Most recently, in Billington v. Ginn-La Pine Island, Ltd., LLLP , 192 So. 3d 77, 82 (Fla. 5th DCA 2016), the Fifth District Court of Appeal noted that “ Oceanic Villas has generated considerable confusion in the lower courts,” and sought to reconcile that decision with Florida law and general contract principles. The court struggled with the notion that a party could avoid a nonreliance clause simply based on policy grounds, finding that “to permit a party to contradict such a promise made in a nonreliance clause is to sanction a breach of the very contract that is the subject of the dispute.”27
Instead, the Billington court held that the nonreliance clause at issue should be enforced, explaining:
We emphasize that the disclaimer clauses here are as clear and conspicuous as they are comprehensive. If these clauses are insufficient to render a claim for fraud “incontestable” within the contemplation of the Oceanic Villas court, then no disclaimer can possibly accomplish that objective — an objective that is both reasonable and essential in our complex and litigious society. Written contracts are intended to head-off disputes. Public policy strongly favors the enforcement of contracts. Although our decision might benefit those who would use a disclaimer clause to cleverly avoid the consequences of a deliberate fraud, contracting parties can protect themselves against such fraudulent practices by respecting the gravity inherent in the contracting process and carefully reviewing a contract to ensure that material representations are expressed in the instrument.28
The Billington court certified a number of questions regarding the enforceability of nonreliance clauses, although neither side sought discretionary review in the Florida Supreme Court. To date, the Fifth District Court of Appeal’s decision in Billingtonoffers the most comprehensive analysis of nonreliance clauses by a Florida court, albeit an analysis that expressly states a conflict with the Fourth District Court of Appeal’s decision in Lower Fees, Inc. v. Bankrate, Inc. , 74 So. 3d 517, 519 (Fla. 4th DCA 2011).29
The Right Question: Can Parties
Contract to Define the Duties Owed to One Another?
In our initial hypothetical, once the investor decided to invest in the company, its representatives began the investor’s due diligence process. It requested and reviewed the company’s internal documents. It met with and talked to the company’s officers and key personnel. Over the course of diligence, it likely heard numerous opinions regarding the potential of the company, impressions regarding the industry and competitive landscape, and projections about the future.
Those opinions, impressions, and projections presumably were made in good faith, but by the time the investor is ready to sign, we would not expect the company to know exactly what statements were made by its representatives or to be able to affirm their complete accuracy. Moreover, the company certainly is not in a position to know how the investor understood the statements it heard, whether it may have misheard any of those statements, or whether it may misremember those statements in six months. The company may want to mitigate the risk that, as time passes, memories will change. Likewise, the investor may want to mitigate its own risk. It may want to ask the company to affirm that its financial statements are materially accurate, or that the company has fully disclosed all the material risks of any ongoing litigation, or that the company’s intellectual property has not been licensed or assigned to a third party. Although it has conducted its own due diligence, it will not be able to verify every statement made to it, and a few of those statements likely will be very important to its investment decision. As to those specific representations, if the investor decides to trust the company’s representatives, it will believe it is entitled to count on the truthfulness of those statements.
Both sides have risk, but rather than exhaust months and years verifying every aspect of the investment in a futile effort to eliminate that risk, both sides are willing to take a bet — to trust the other side. As the Seventh Circuit Court of Appeals has observed, a nonreliance clause is in some ways similar to a truthful disclosure:
A non-reliance clause is not identical to a truthful disclosure, but it has a similar function: it ensures that both the transaction and any subsequent litigation proceed on the basis of the parties’ writings, which are less subject to the vagaries of memory and the risks of fabrication.
Memory plays tricks. Acting in the best of faith, people may “remember” things that never occurred but now serve their interests. Or they may remember events with a change of emphasis or nuance that makes a substantial difference to meaning. Express or implied qualifications may be lost in the folds of time. A statement such as “I won’t sell at current prices” may be recalled years later as “I won’t sell.” Prudent people protect themselves against the limitations of memory (and the temptation to shade the truth) by limiting their dealings to those memorialized in writing, and promoting the primacy of the written word is a principal function of the federal securities laws.30
If reliance is really a form of a bet — a bet on the likelihood that your counterparty has the same goals and principles as you with respect to the investment — then a specific nonreliance clause is, like a representation or disclosure, a way for the parties to allocate the risks of the bet as they see fit.
Moreover, if a court enforces nonreliance clauses that allocate the risks of a transaction, these clauses will allow parties to lower their transaction and diligence costs by helping them identify up front the representations that are most important to them. If the investor insists on a specific representation regarding the company’s financial statements or some other aspect of its business, the company will be incentivized to verify the accuracy of any statements made to the investor regarding those parts of its business. A properly negotiated nonreliance clause, in this sense, will detail the representations that the buyer deems most material to his or her decision to invest, the representations that the buyer presently believes induced its decision to contract, and the representations that the buyer reasonably expects the seller to be accountable or if they turn out to be untrue. Ronald Reagan famously said, “trust, but verify.” The representations in a nonreliance clause essentially say, “I trusted you when you made these representations, so you need to verify that they are true.” 31
Understood in this light, a nonreliance clause does not implicate public policy concerns or allow parties to sidestep their own fraud. Instead, the parties are simply specifying the material representations that they are willing to bet (rather than verify themselves) are truthful and accurate. To the extent that a seller does make a false statement during negotiations, but such a statement is not included among the representations listed in a nonreliance clause, a court should not be concerned that enforcement of a nonreliance clause is akin to condoning fraud. Indeed, the fact that the statement was not included in the nonreliance clause is recognition by the buyer that it was not concerned with holding the seller accountable for that statement. It is recognition that it accepted the risk that such a statement could be false, and that because it accepted that risk, it did not rely on the false statement.
In case nobody has told you, she said, this is the United States of America, where nobody has a right to rely on anybody else — where everybody learns to make his or her own way.— Kurt Vonnegut32
Nonreliance clauses allow parties to allocate risk and to define the extent of their relationship to each other. From this perspective, these clauses are not just helpful — they are essential. A fraud case is brought because a party comes to believe that a past representation (or omission) made to it was false, but the reasons for that falsity, especially given the passage of time, may be far from clear. As Nassim Taleb observes:
“To figure out why ethics, moral obligation, and skills cannot be easily separable in real life, consider the following. When you tell someone in a position of responsibility, say your bookkeeper, ‘I trust you,’ do you mean that (1) you trust his ethics (he will not divert money to Panama), (2) you trust his accounting precision, or (3) both? The entire point…is that in the real world it is hard to disentangle ethics on one hand from knowledge and competence on the other.”33
In tort law, as well, it can be hard to disentangle fraud from an innocent mistake or a faulty prediction or incomplete diligence or bad memory. Parties memorialize contracts to paper to lessen the likelihood of subsequent misunderstandings. Nonreliance clauses, if enforced, can serve the same purpose.
1 See Billington v. Ginn-La Pine Island, Ltd., LLLP , 192 So. 3d 77, 84 (Fla. 5th DCA 2016) (holding, in enforcing nonreliance clause, “[o]n balance, the sanctity of a contract and predictability of an outcome in a dispute should take precedence where, as here, the parties clearly manifest the intent to avoid such claims”); see also Abry Partners, L.P. v. F&W Acquisition LLC , 891 A.2d 1032, 1061 (Del. Ch. 2006) (finding that courts should “respect the ability of sophisticated businesses…to make their own judgments about the risk they should bear and the due diligence they undertake, recognizing that such parties are able to price factors such as limits on liability”). These courts likewise prioritize the policy goal of holding parties to their promises. See Billington , 192 So. 3d at 84 (“[W]e hold that the ‘non-reliance’ clauses in this case negate a claim for fraud in the inducement because Appellant cannot recant his contractual promises that he did not rely upon extrinsic representations.”); Great Lakes Chem. Corp. v. Pharmacia Corp. 788 A.2d 544, 555-56 (Del. Ch. 2001) (“Were this [c]ourt to allow Great Lakes to disregard the clear terms of its disclaimers and to assert its claims of fraud, the carefully negotiated and crafted [p]urchase [a]greement would similarly not be worth the paper it is written on.”).
2 See Oceanic Villas v. Godson , 148 Fla. 454, 457-58 (1941) (reversing dismissal based on clause stating that lessee signed lease “without any influence, representation, fraud or duress,” and holding that the clause could not be enforced on fraudulent inducement claim); Lower Fees, Inc. v. Bankrate, Inc. , 74 So. 3d 517, 519-20 (Fla. 4th DCA 2011) (refusing to enforce nonreliance clause, and stating “the lies one tells to get a contract signed trumps the lie one tells when signing the contract itself”). The law in Florida and other jurisdictions is reviewed in some detail by Manuel Farach, An Eloquent Argument for Enforcing Nonreliance Clauses: Billington v. Ginn-La Pine Island, Ltd. , LLLP , 91 Fla. B. J. 48 (Apr. 2017). As Farach notes, nonreliance clauses, as opposed to blanket waivers of fraud claims, “approach extra-contractual statements and representations from the perspective of the contract and provide a much better method of memorializing and enforcing the parties’ true agreement.” Id. Farach makes a strong case for the policy goals behind respecting a party’s freedom of contract.
3 Federal courts in Florida have observed that “there seems to be disagreement amongst Florida courts on the issue of whether a non-reliance clause negates a claim for fraud.” Asokan v. Am. General Life Ins. Co. , No. 6:15-cv-2048-Orl-40KRS, 2017 WL 3712919, at *9 (M.D. Fla. Aug. 1, 2017). They have also noted, “the one thing Florida courts do agree on regarding non-reliance clauses is that they must be sufficiently expressed, specific, and unambiguous with respect to the representation at issue.” Asokan , 2017 WL 3712919, at *9 (citations and quotations omitted). The 11th Circuit last year held that the law of Florida remains the law set forth in the Florida Supreme Court’s 1941 decision in Oceanic Villas, Inc. v. Godson , 148 Fla. 454, 4 So. 2d 689 (1941): “ Oceanic Villas held that a contract provision, including an ‘as is’ clause, cannot preclude a fraud claim, unless the contract expressly states that it is incontestable on the ground of fraud.” Global Quest, LLC v. Horizon Yachts, Inc. , 849 F. 3d 1022, 1028 (11th Cir. 2017) (citing Oceanic Villas , 4 So. 2d at 690-91).
4 Some courts in Florida have observed that the “intent” element in a common law fraud claim is “more stringent” than the element of scienter in federal securities claims, noting that it “requires that one plead actual knowledge of falsity, as opposed to the scienter requirement of severe recklessness that has been discussed.” Bruhl v. PricewaterhouseCoopers Int’l , No. 03-23044-Civ., 2007 WL 983263, at *6 (S.D. Fla. Mar. 27, 2007); Tapken v. Brown , No. 90-691-CIV-MARCUS, 1992 WL 178984, at *23 (S.D. Fla. Mar. 13, 1992) (same).
5 See Florida Supreme Court Standard Jury Instructions — Civil Cases, Instruction 409.7 (listing elements as whether the defendant intentionally made a false statement concerning a material fact, whether the defendant knew the statement was false or know it did not know whether it was true or false, whether the defendant intended that another would rely on the false statement, whether the plaintiff relied on the false statement, and whether the false statement was a legal cause of injury to the plaintiff). See Restatement (Second) of Torts 548A (“A fraudulent misrepresentation is a legal cause of a pecuniary loss resulting from action or inaction in reliance upon it if, but only if, the loss might reasonably be expected to result from the reliance.”).
6 Florida courts recognize three types of reliance — actual reliance, justifiable reliance, and reasonable reliance. See Billington , 192 So. 3d at 81, n.4. The discussion of the types of reliance, and how they are applied to different types of misrepresentation claims, is beyond the scope of this article.
7 FindWhat Investor Group v. FindWhat.com, 658 F.3d 1282, 1311 (11th Cir. 2011); see also Erica P. John Fund, Inc. v. Halliburton Co. , 563 U.S. 804, 812 (2011) (“We have referred to the element of reliance in a private Rule 10b-5 action as ‘transaction causation,’ not loss causation.”); Halliburton Co. v. Erica P. John Fund, Inc. , — U.S. —, 134 S. Ct. 2398, 2418 (2014) (same).
8 Engalla v. Permanente Medical Group, Inc. , 938 P.2d 903, 976-77 (Cal. 1997) (internal quotations and citations omitted); see also Hall v. Time, Inc. , 70 Cal. Rptr. 3d 466, 471 n.2 (Cal. Ct. App. 2008) (“causation” refers to both “the causation element of a negligence cause of action” and “to the justifiable reliance element of a fraud cause of action”); Mirkin v. Wasserman , 858 P.2d 568, 573 (Cal. 1993) (“reliance can be thought of as the mechanism of causation in an action for deceit”).
9 In the “but for” conception of causation, court considers whether “but for” the misrepresentation or omission, the defendant would have been able to make a different decision. In this sense, fraud is essentially a question of intentional interference with a defendant’s decisionmaking: “Conceptually, the wrong that is defined by the tort of fraud is not an interference with the victim’s interest in being free from certain types of harm , but instead of interference with her interest in being able to make certain kinds of decisions in certain settings free of misinformation generated by others. This interest simply cannot be interfered with unless the defendant’s misrepresentations are relied upon by the victim. In this sense, the tort of fraud cannot be accomplished until there has been reliance by the victim upon the misrepresentation.” John C. P. Goldberg, et al., The Place of Reliance in Fraud , 48 Ariz. L. Rev. 1002-03 (2017) (emphasis added).
10 Erica P. John Fund, 563 U.S. at 812. The Supreme Court has found that proof of reliance “ensures that there is a proper connection between a defendant’s misrepresentation and a plaintiff’s injury — namely, that the plaintiff has not just lost money as a result of the misstatement, but that he was actually defrauded by it.” Halliburton Co. v. Erica P. John Fund, Inc. , — U.S. —, 134 S. Ct. 2398, 2418 (2014) (internal citations and quotations omitted).
11 In Cavalier Carpets, Inc. v. Caylor, 746 F. 2d 749 (11th Cir. 1984), the 11th Circuit Court of Appeals affirmed the district court’s judgment for the defendant in a securities action. The district court had explained to the jury that reliance means “that the investors acted upon the misrepresentation as if it were true, or acted upon the information that was given to him which contained an omission of material fact as if he had been presented with all the facts that were important in making his investment decision.” Id.
12 Goldberg, The Place of Reliance in Fraud, 48 Ariz. L. Rev. at 1008, n.27 (emphasis added). “[R]eliance and proximate cause are not direct analogues, but rather doctrinal cousins. As we explain below, the direct analogue in negligence law to reliance is instead the rule requiring a negligence plaintiff to prove that the defendant’s carelessness constitutes a breach of a duty owed to her , rather than a breach of a duty owed to someone differently situated.”
13 Id. at 1010-11 (“[R]eliance is an element of fraud because, like all torts, fraud is a relationship wrong. Torts are ways of acting whereby one person breaches a legal obligation of non-injury that is owed to another person or persons…. Reliance is what renders fraud a relational wrong and hence a tort.”).
14 Id . at 1011.
15 See David DeSteno, The Truth About Trust at 2 (2014).
16 See id. (“Trust implies a seeming unknowable — a bet of sorts, if you will. At its base is a delicate problem centered on the balance between two dynamic and often opposing desires — a desire for someone else to meet your needs and his desire to meet his own.”).
17 See id. (Trust “is simply a bet, and like all bets, it contains an element of risk. Yet risk is something most of us could do without.”).
18 See id.
19 See Prairie Capital III, L.P. v. Double E Holding Corp. , 132 A.3d 35, 50 (Del. Ch. 2015) (quotations and citations omitted). Delaware courts have further observed: “To fail to enforce non-reliance clauses is not to promote a public policy against lying. Rather, it is to excuse a lie made by one contracting party in writing — the lie that it was relying only on contractual representations and that no other representations had been made — to enable it to prove that another party lied orally or in a writing outside the contract’s four corners.” Abry Partners V, L.P. , 891 A.2d at 1058.
20 See, e.g., Le Macaron, NNC v. Le Macaron Dev. LLC , No. 8:16-cv-918-17TGW, 2016 WL 6211718, at *4 (M.D. Fla. Oct. 24, 2016) (“The majority of federal courts appear to hold that merger and non-reliance clauses may prevent a plaintiff from establishing that element of reliance, assuming that the contractual language is sufficiently express, specific, and unambiguous with respect to the representation at issue.”); Billington , 192 So. 3d at 80 (noting that enforcing a contract agreement to “forego reliance on any prior false representation and limit…reliance to the representations…expressly contained in the contact” “appears to be the rule in the majority of jurisdictions”) (quoting La Pesca Grande Charters, Inc. v. Moran , 704 So. 2d 710, 714 n. 1 (Fla. 5th DCA 1998)); Prairie Capital III, L.P. , 132 A.3d at 50(“Delaware law enforces clauses that identify the specific information on which a party has relied and which foreclose reliance on other information.”); Barr v. Dyke , 49 A.3d 1280, 1288 (Me. 2012) (“With regard to disclaimer-of-reliance clauses in particular, however, courts have favored enforcement when the parties were experienced business people.”). Nonreliance clauses vary substantially in form and function; this article assumes a nonreliance clause that lists out specific representations and limits the buyer’s reliance to those representations.
21 Oceanic Villas, 148 Fla. at 458.
22 Id. Two years before Oceanic Villas, the Florida Supreme Court in Cassara upheld a dismissal based on a merger and integration clause. Farach notes that Billington was unable to reconcile these cases. See Farach, An Eloquent Argument for Enforcing Nonreliance Clauses: Billington v. Ginn-La Pine Island, Ltd. , LLLP , 91 Fla. B. J. at 48 (“Despite valiantly trying to do so, the Billington court was not able to harmonize the two decisions. The problem seems to be that the two cases do not fit the more modern view of disclaimer clauses.”).
23 Oceanic Villas, 148 Fla. at 459 (“This provision in the contract does not make the contract incontestable because of fraud, but evidences an agreement between the parties that no fraud had been committed. We think there is clearly a distinction in the effect of a stipulation of a contract which recognizes that fraud may have been committed and stipulations that such fraud, if found to have been committed, should not vitiate the contract, and one in which the parties merely stipulate that no fraud has been committed and that neither party has relied upon the representations of the other party made prior to the execution of the contract.”).
24 See Beeper Vibes, Inc. v. Simon Property Group, Inc. , 600 F. App’x 314, 318-19 (6th Cir. 2014) (“simply because Beeper Vibes is not prohibited from bringing a fraud claim does not mean Beeper Vibes can prove the elements of its fraud claim”) (emphasis in original). The 11th Circuit in Global Quest observed that the import of Beeper Vibes is that a nonreliance clause “may constitute evidence against plaintiff’s fraud allegations,” although it will not preclude fraud as a matter of law. Global Quest, 849 F.3d at 1028.
25 The 11th Circuit has noted, “Florida’s intermediate courts of appeal have continued to apply Oceanic Villas as recently as 2011.” Global Quest, LLC , 849 F.3d at 1028 (citing Lower Fees, Inc. v. Bankrate, Inc. , 74 So. 3d 517, 519 (Fla. 4th DCA 2011)). In Lower Fees , the court found that Oceanic Villas held “that a fraudulent inducement claim cannot be defeated by a contractual agreement unless the contract specifically states a fraud claim is not sufficient to negate the contract.” Lower Fees , 74 So. 3d at 519. Lower Fees interpreted Oceanic Villas as follows: “[W]e conclude our supreme court has spoken clearly that no contract provision can preclude rescission on the basis of fraud in the inducement unless the contract provision explicitly states that fraud is not a ground for rescission.” Id. at 520.
26 In Hillcrest Pacific Corp. v. Yamamura , 727 So. 2d 1053, 1058 (Fla. 4th DCA 1999), the appeal court affirmed the dismissal of fraud claims, finding that “the express language of the
greement and other exhibits attached to the amended complaint demonstrate that Pacific did not reasonably rely upon any material misrepresentations made by the appellees.” The court found that there could be no reliance where the express terms of an agreement disclaim on prior negotiations or statements. Id. Likewise, federal courts in Florida have held that “‘[r]eliance on fraudulent representations is unreasonable as a matter of law where the alleged misrepresentations contradict the express terms of the ensuing written agreement.’” Garcia v. Santa Maria Resort, Inc. , 528 F. Supp. 2d 1283, 1295 (S.D. Fla. 2007) (quoting Eclipse Med., Inc. v. Am. Hydro-Surgical Instruments, Inc. , 262 F. Supp. 2d 1334, 1342 (S.D. Fla. 1999) (emphasis added)); Linville v. Ginn Real Estate Co., LLC , 697 F. Supp. 2d 1302, 1307-08 (M.D. Fla. 2010) (same); Creative Am. Education, LLC v. The Learning Experience Sys., LLC , 9:14-cd-80900, 2015 WL 2218847, at *17 (S.D. Fla. May 11, 2015) (enforcing nonreliance clause in franchise agreement based on Garcia ).
27 Billington , 192 So. 3d at 83.
28 Id. at 84. The court continues: “The law necessarily presumes that parties to a contract have read and understood its contents. Were we to reach a contrary holding, contracting parties would have no ability to protect themselves against those who would fabricate claims of fraud to avoid the consequences of a contractual obligation. On balance, the sanctity of a contract and predictability of an outcome in a dispute should take precedence where, as here, the parties clearly manifest the intent to avoid such claims.”
29 Id. at 85 (“We disagree with and express conflict with our sister court’s conclusion that a ‘non-reliance’ clause does not negate a claim for fraud.”).
30 Rissman v. Rissman , 213 F.3d 381, 384 (7th Cir. 2000); see also id. at 385 (“Arnold calls the no-reliance clauses ‘boilerplate,’ and they were; transactions lawyers have language of this sort stored up for reuse. But the fact that language has been used before does not make it less binding when used again. Phrases become boilerplate when many parties find that the language serves their ends. That’s a reason to enforce the promises, not to disregard them. People negotiate about the presence of boilerplate clauses.”); Billington , 192 So. 3d at 84 (“Were we to reach a contrary holding, contracting parties would have no ability to protect themselves against those who would fabricate claims of fraud to avoid the consequences of a contractual obligation.”).
31 Farach notes similarly, “[n]onreliance clauses, on the other hand, force parties to trust but verify.” Farach, An Eloquent Argument for Enforcing Nonreliance Clauses:Billington v. Ginn-La Pine Island, Ltd. , LLLP , 91 Fla. B. J. at 48.
32 Kurt Vonnegut, Slapstick at 102 (1972).
33 Taleb, Skin in the Game at 6 (2018).