Misrepresentation

Question 1

Intentional and Reckless a/k/a Deceit or Fraud

Strict Liability for Inaccurate Statements (Product Liability)

Negligence

Answer 1

Three Common Law Categories of Fault

Question 2

Securities fraud

Deceptive trade practices

Answer 2

Statutory Misrepresentation

Question 3

Words
Conduct
Silence where there is a duty to speak

Answer 3

Forms of Misrepresentation

Question 4

Material misrepresentation of presently existing fact

Intent to induce reliance or expectation of reliance on statements

Justifiable reliance on part of P

Causation

Remedies

Answer 4

Intentional Misrepresentation (Fraud/Deceit) (Elements)

Question 5

Materiality includes
anything that a reasonable person would attach importance to its existence or nonexistence; or
maker of representation knows or has reason to know that recipient regards or is likely to regard matter as important to choice

Answer 5

Intentional Misrepresentation (Fraud/Deceit)

Question 6

Knowledge of falsity
Reckless disregard for truth
Lack of any basis for statements made or implied

Answer 6

Intentional Misrepresentation (Fraud/Deceit)

Scienter

Question 7

Need not be reasonable, just justifiable.
May rely on express assurances regardless of sophistication unless facts warrant further investigation or action
If later learned of falsity prior to taking action, reliance is not justifiable

Answer 7

Intentional Misrepresentation (Fraud/Deceit)

Justifiable reliance on part of P

Question 8

Actual economic damages

• Fraud may allow P to recover the difference between actual value and the value property would have been worth if representation had been true, i.e. benefit of the bargain losses as opposed to solely “out of pocket” losses. See example,
• Recovery of personal injury and property damages usually better suited for another cause of action.

May be excused from performance
May seek restitution of property fraudulently taken
May recover any benefits conferred in an action for rescission

Answer 8

Intentional Misrepresentation (Fraud/Deceit)

Remedies

Question 9

Same as intentional misrepresentation except statements are made honestly, but either unreasonably, carelessly, or by mistake
May apply to all types of conduct, including misleading silence
Generally limited to negligent misrepresentation in business transactions where D had a financial stake in the transaction

Answer 9

Negligent Misrepresentation

Elements

Question 10

Usually limited to out-of-pocket losses rather than the benefit of the bargain type losses recoverable where fraud
Generally cannot recover for additional personal injury or property damages, or punitive damages. Again, better suited for a different cause of action

Answer 10

Negligent Misrepresentation

Damages

Question 11

Include comparative negligence and assumption of risk

Answer 11

Negligent Misrepresentation

Defenses

Question 12

Same as fraud and negligence except that P need not allege fraud or bad faith inducement or unreasonableness
Generally limited to misrepresentations made during the course of a sale or exchange of land or goods, or a lease of same
Damages generally limited to out of pocket pecuniary (economic) losses. See example on previous slide. Under strict liability, A could recover from B even if B did not have a financial stake in the outcome.

Answer 12

Strict Liability & Misrepresentation

Elements

Question 13

May recover damages for personal injury or property damage resulting from misrepresentations made in the course of the sale of a defective product by anyone where it is reasonably foreseeable that he would use product in the manner intended.
No misrepresentation if statement does not influence transaction and no justifiable reliance

Answer 13

Misrepresentation and Liability for Defective Product

Question 14

Intentional: D must have intended to induce reliance of a particular P or class of persons to which P belongs
For S/L,  P need only establish  misrepresentation and justifiable reliance
Negligence: P need only show that a reasonable D should have known misrepresentation to be false when making statement

Answer 14

Intentional v. Strict v. Negligent Misrepresentation

Question 15

Anyone who D should have reasonably foreseen that third person would suffer harm

Answer 15

Misrepresentation and 3rd Parties

Broad view

Question 16

Anyone to whom D had special reason to expect misrepresentation would be communicated to others

Answer 16

Misrepresentation and 3rd Parties

Narrow view

Question 17

Requires awareness that statement would be used for a particular purpose, that misrepresentations would be relied on for that purpose; and there is some additional nexus between maker and recipient
Public policy still may preclude finding, e.g. too remote; too unreasonable a burden
Statutes may govern

Answer 17

Negligent misrepresentations

Question 18

No duty to disclose information because it would be useful, interesting or important to another person
May not actively conceal facts basic to the transaction
Must fully disclose all information once voluntarily elect to make a partial disclosure
Must correct any statement previously believed to be true buy later learned to be false
Some states have enacted property disclosure laws variety of common issues
Duty to disclose all material facts where fiduciary and confidential relationship
May have knowledge of particular sensitivity.

Answer 18

Silence and Duty to Speak

Question 19

Where opinion implies knowledge of facts that are compatible with opinion or maker knows facts sufficient to justify maker in forming it
Opinion is stated as an existing fact
Maker has a special reason to expect reliance, e.g., recipient has a mental deficiency; maker holds itself out as a disinterested party; maker prevents further investigation of truth; existence of fiduciary relationship

Answer 19

Statements of Opinion

Exceptions

Question 20

Generally, expressions of opinions are not actionable, including mere puffery (“sales talk”)

Answer 20

Statements of Opinion

Question 21

May be deemed a fact if other evidence shows it was falsely stated to induce reliance
at the time it was made

Answer 21

Statement of Intention

Question 22

fact specific

May be actionable if know that prediction is false.

Answer 22

Statement of Prediction

Question 23

May be actionable if presented as statement of fact rather than opinion as to legal consequences.

Answer 23

Statement of Law:

Question 24

Need not be reasonable, just justifiable, i.e., P will be denied recovery if not really a victim because falsity is so obvious or statement can be checked by the slightest effort
May rely on express assurances regardless of sophistication unless facts warrant further investigation or there are danger signals requiring investigation
If later learned of falsity prior to taking action, reliance is not justifiable
Comparative negligence is not a defense to intentional misrepresentation

Answer 24

Justifiable Reliance