What are two types of tortious misrepresentation claims?
- Scienter fraud: requires a knowing or reckless fraud (have to prove negligent).
- Negligent misrepresentation
What is negligent misrepresentation?
Liability for negligent misrepresentation applies only when:
- DF and PL are in a pre-existing business or employment relation or [i.e. employer/employee or buyer/seller]
- The communication creates a dangerous or unreasonable physical risk of harm
honest ignorance is not fraud, but it might constitute negligent misrepresentation.
What are the damages for scienter fraud?
Benefit of the bargain.
PL may recover the profit he would have made if the misrepresentation had been true.
Consequential damages: any special expenses resulting from the fraud
What are damages for negligent misrepresentation?
Out-of-pocket expenses. The difference between what the PL paid and the true value of what he or she got.
Out of pocket expense is sully less than benefit of the bargain.
Consequential damages: any special expenses resulting from the fraud
Three more requirements must be met to state a claim for fraud or negligent misrepresentation:
- Reliance requirement.The Plaintiff must have relied on the defendant’s false statement or misrepresentation
- Justified reliance. The plaintiff must not only rely…, the reliance must be justified
- Materiality Requirement. The false statement or misrepresentation relied upon must be material
Reliance and misrepresentation must be material.
Not justified in relying on misrepresentations that are not factual. i.e. opinions, representations about the law.
No duty to disclose exceptions:
- Where the seller actively conceals a defect
- Where the seller tells a half-truth with the intent to deceive
- Where there is a fiduciary relationship between the parties
- Where the facts are exclusively within the knowledge of one party – the other party is not in a position to discover the facts for himself
Duty to disclose minority rule.
If either party to a contract conceals a material fact which he is in good faith bound to disclose, then his silence is fraudulent
Majority rule for duty to disclose:
no duty to disclose
Duty to disclose Modern Rule
A seller of land has a duty to disclose (to noncommercial buyers) facts
- which are known to the seller,
- which are material to the transaction, and
- which are not readily discernible to the purchaser
What is commercial disparagement?
Any false statement. Do not need ownership.
Third Party Negligent Misrepresentation Rule:
No third party liability for negligent misrepresentation because the class of potential plaintiffs is indeterminate.
Strict Responsibility:
speaker either had particular means of ascertaining the pertinent facts, or his position made possible complete knowledge and the statements fairly implied that he had it. [speaker should have known or should have not spoken]
Strict Responsibility for negligent misrepresentation in cases where the harm is foreseeable (i.e. where the class of potential plaintiffs is determinate)
Loophole to justified reliance:
If you state now your present intention to do something in the future, you are stating a fact…the fact of your present intention.
