Reasonable reliance is a legal concept that refers to what a prudent person would believe and act based on information provided by another party. This concept is prevalent in several areas of law, notably in cases involving the tort of fraud.
For instance, in Windsong Lane Farms v Telmark, LLC, it was established that plaintiffs alleging fraud must not only demonstrate their reliance on the defendant’s misrepresentation but also prove that such reliance was reasonable. In other words, a person who claims to have been harmed by another’s false statement must prove that they were justified under the particular circumstances in believing that the statement was actually true.
Reasonable reliance “connotes something more than simply a bare hope or anticipation,” it requires a level of credibility in the statement’s validity. If circumstances exist where reliance on a statement cannot be reasonably anticipated or foreseeable, the plaintiff cannot establish reasonable reliance. In civil trials, the jury will decide based on the evidence whether or not a plaintiff’s reliance on a defendant’s statement was reasonable under the circumstances of the case. See: Home Mutual Insurance Company v. Broadway Bank and Trust Company.
[Last updated in March of 2024 by the Wex Definitions Team]