Monday, June 28, 2010
1 - Misrepresentation
1 - Misrepresentation
PLEASE NOTE THAT THE FOLLOWING IS TAKEN FROM SOME OF MY CLASS NOTES, SOME OF WHICH IS MY OWN PERSONAL WORK AND SOME OF WHICH BELONGS TO CONCORD LAW SCHOOL. IT IS POSTED TO HELP MY IL STUDENTS IN PARTICULAR. IT CANNOT BE DISSEMINATED WITHOUT EXPRESS, WRITTEN PERMISSION.
The tort of misrepresentation is a catch-all, in a sense. It addresses all the situations where fraud and deceit lead to damages. It serves to compensate on the civil side for the harm suffered by victims of crimes like embezzlement and larceny-by-trick and it allows for more than just reparations. Here, successful plaintiffs can get damages for the “benefit of the bargain” (what they would have received if the facts misrepresented were true) and punitive damages, too. So it is an important tort.
Elements: (1) a false and material misrepresentation, (2) scienter, (3) intent to induce reliance, (4) causing justifiable reliance and (5) pecuniary loss.
1 - Material Misrepresentation: There must be a false representation of a material fact (as opposed to opinion, “puffing” or something that is not substantially significant). What about an omission to state something? Does that create a “misrepresentation? Not under traditional rule (“caveat emptor”) – unless Defendant actively conceals something that is deemed as “material.”
2 - Scienter: What is scienter? Scienter is knowledge of falsity or reckless disregard for truth or falsity.
3 - Reliance: What about reliance? Defendant must intend to and actually induce reliance and the reliance must be justifiable. The standard for determining justifiable reliance is subjective (only examining the party's specific knowledge and sophistication) and not an objective one taking into account what a reasonable person would have relied upon.
4 - Pecuniary Loss: What about the final element – “pecuniary loss?” Pecuniary loss is generally measured as out-of-pocket loss (value given minus value received) or by the “benefit of bargain” approach value given minus value Plaintiff would have received had the Defendant’s representation been true).
Note here, that we are talking about fraud and deceit which is tantamount to an intentional tort, but the student should remember that there is also a cause of action for negligent misrepresentation. Academically, in that cause of action, follow the element of a general negligence claim though, as a technical matter, the claim is much more complex.
Professor Doug Holden
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