Misrepresentation 1

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Misrepresentation. NomenclaturefrauddeceitmisrepresentationLevels of culpabilityintentional misrepresentation (fraud, deceit)negligent misrepresentation innocent mispresentation (rare liability). Elements of Intentional M.. 1. A Misrepresentationfalse statement of presently existing material fact2. Scienterknowledge or reckless disregard of falsity3. Intent to induce reliance4. Justifiable reliance5. Pecuniary harm .

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Misrepresentation 1

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1. Misrepresentation #1

2. Misrepresentation Nomenclature fraud deceit misrepresentation Levels of culpability intentional misrepresentation (fraud, deceit) negligent misrepresentation innocent mispresentation (rare liability) Fraud: oldest label--implies intentional misresp. (deceit, too) Mispresentation = more modern lable--more room for liability without implying wrongful intentFraud: oldest label--implies intentional misresp. (deceit, too) Mispresentation = more modern lable--more room for liability without implying wrongful intent

3. Elements of Intentional M. 1. A Misrepresentation false statement of presently existing material fact 2. Scienter knowledge or reckless disregard of falsity 3. Intent to induce reliance 4. Justifiable reliance 5. Pecuniary harm Scienter-reckless--D knew he didn’t know (we make 5M$ profit last year Itent to induce reliance (includes knowledge with substantial certainty? And includes 3rd parties that D knows will rely??see last assignment. Damages: most cts deny emotional. [but see p.I or nied actions!!] 2 measures: intentional=ben bargain (maj) out-of-pocket = alternative, esp for innocent & neglScienter-reckless--D knew he didn’t know (we make 5M$ profit last year Itent to induce reliance (includes knowledge with substantial certainty? And includes 3rd parties that D knows will rely??see last assignment. Damages: most cts deny emotional. [but see p.I or nied actions!!] 2 measures: intentional=ben bargain (maj) out-of-pocket = alternative, esp for innocent & negl

4. Elements of Intentional M. 1. A Misrepresentation false statement of presently existing material fact 2. Scienter knowledge or reckless disregard of falsity 3. Intent to induce reliance 4. Justifiable reliance 5. Pecuniary harm Scienter-reckless--D knew he didn’t know (we make 5M$ profit last year Itent to induce reliance (includes knowledge with substantial certainty? And includes 3rd parties that D knows will rely??see last assignment. Damages: most cts deny emotional. [but see p.I or nied actions!!] 2 measures: intentional=ben bargain (maj) out-of-pocket = alternative, esp for innocent & neglScienter-reckless--D knew he didn’t know (we make 5M$ profit last year Itent to induce reliance (includes knowledge with substantial certainty? And includes 3rd parties that D knows will rely??see last assignment. Damages: most cts deny emotional. [but see p.I or nied actions!!] 2 measures: intentional=ben bargain (maj) out-of-pocket = alternative, esp for innocent & negl

5. D’s Representation false statement of presently existing material fact Example: “This time share is in the community that had the greatest increase in value in Arizona during in the ‘90’s.” [Right! Its’ desert!!]

6. Troublesome applications 1. D’s intentions “No, I don’t intend to open a competing store.” 2. D’s “opinions” “You could easily put a pool in the back yard” 3. D’s strategic omissions “Are there termites? Gosh, I’ve never seen a single one here.” [but my wife did and it cost $5,000 to fix the damage!] OPINIONS: “This convertible is the one that chicks like most to be seen in.” “There is no better ride on the planet.”OPINIONS: “This convertible is the one that chicks like most to be seen in.” “There is no better ride on the planet.”

7. 1. D’s Intentions-- A Presentling Existing Fact? Adams v. Gillig (NY 1910), 917 Why is P upset? Do D’s statements abt intentions suffice? How can P prove that D’s statements about his plans were false when he made them? Facts: purchaser said he’d build a home on lot next to seller, but build a garage. Seller fears lower value for his remaining lots. Q=is a lie about intention an existing material fact? Yes if present PROOF? Hired architect the day after pruchase (918) Facts: purchaser said he’d build a home on lot next to seller, but build a garage. Seller fears lower value for his remaining lots. Q=is a lie about intention an existing material fact? Yes if present PROOF? Hired architect the day after pruchase (918)

8. Intentions - 2 What if D really did intend to build a house, but changed his mind a year later? D’s mistake here? How could P’s lawyer protect P? Changed his mind? No c/a--cannot prove that he was lying with intent to decieve. Alternative c/a? Breach of promise [see property & K law re statute of frauds and parol evidence rule] D’s mistake=moving too quickly; shady dealers know better? PUT IT IN THE CONTRACT!!! THUS: tort law only if D lies about intention to induce sale. Changed his mind? No c/a--cannot prove that he was lying with intent to decieve. Alternative c/a? Breach of promise [see property & K law re statute of frauds and parol evidence rule] D’s mistake=moving too quickly; shady dealers know better? PUT IT IN THE CONTRACT!!! THUS: tort law only if D lies about intention to induce sale.

9. 2. D’s “Opinions” Renter gives prospective Landlord the name of her last Lessor. Landlord calls Lessor and asks whether Renter is a desirable tenant. Lessor says “I think so.” Renter was nothing by trouble for Lessor. Misrepresentation by of “fact” by Lessor???

10. Vulcan Metals Co. (1918) Allegedly false representions of : vacuum quality that vacuum had never been marketed before T.Ct.=directed verdict for D Issues: 1. Can sales puffing=misrepresentation? 2. Are reps about prior marketing actionable?

11. Vulcan - 2 Issue #2? (never marketed) Held? Issue #1 (quality) Held? Not a basis for c/a here Why not? Parties=equal footing opportunity to examine Never Marketed? C/a = jury. [court said that disclosure allegedly in the contract was not so clear that can assume P saw it. Compare to K law!]Never Marketed? C/a = jury. [court said that disclosure allegedly in the contract was not so clear that can assume P saw it. Compare to K law!]

12. Vulcan - 2 Which element is missing? Not “material” (924) [reliance not justified] PGP: buyer shouldn’t have treated as a statement of “fact” but as puffing. What if buyer were a consumer? still might have opportunity to evaluate But stronger case for P bc less ability to judge See comparison of chemist & consumer (923) MATERIALITY: note overlap with “reliance” and “fact” elements.MATERIALITY: note overlap with “reliance” and “fact” elements.

13. Recap “ opinions” Audience helps determine whether statements are reasonably characterized as factual and material. Nature of specific words also matter. “Best ride on the planet”. “Better ride than the Camry” “Consumer reports said best ride in its class.” “Ride is great bc independent suspension.” verifiability v subjectivity.

14. “Opinion” hypos “You could easily put a pool in the back yard” in reality, expensive blasting will be needed. “no, I wouldn’t say that she plays her music too loud.” “she was an okay tenant.” but she is 6 months behind in rent “I had no problems with her.” POOL: lookslike a fact to me (although D may not have known it was false, so no scienter if that is needed) except for the “subjective” term “easily”??? VOTE. MUSIC: too subjective to be true or false? OK TENANT: too general to convey false information (overall impression=subjective??) but “no problems” seems false--implies untrue facts. RS 539POOL: lookslike a fact to me (although D may not have known it was false, so no scienter if that is needed) except for the “subjective” term “easily”??? VOTE. MUSIC: too subjective to be true or false? OK TENANT: too general to convey false information (overall impression=subjective??) but “no problems” seems false--implies untrue facts. RS 539

15. 3. Nondisclosure Half-truths can create false impressions. “Are there termites? Gosh, I’ve never seen a single one here.” [but my wife did and it cost $5,000 to fix the damage!] “half-truth” = false impression Are they legally actionable as “misrepresentations” underlying q: is there an affirmative duty to tell the whole truth? YES But what if you are never asked? HALF-TRUTHS also MAKE STATEMENT THAT YOU LATER LEARN IS FALSE. (928) some courts libeally interpret-931HALF-TRUTHS also MAKE STATEMENT THAT YOU LATER LEARN IS FALSE. (928) some courts libeally interpret-931

16. Nondisclosure - 2 Swinton v. Whitinsville Savings House had termites. Seller knew but never told. Any false affirmative statements? Any half-truths? Any duty to disclose? HELD: no duty to disclose bc no fiduciary duty or position of confidence or dependence. SOME STATES=CONTRA at least re residential termits-OBDE (Wash. 1960), 987. Half-truths later learn falsity relationship=special HELD: no duty to disclose bc no fiduciary duty or position of confidence or dependence. SOME STATES=CONTRA at least re residential termits-OBDE (Wash. 1960), 987. Half-truths later learn falsity relationship=special

17. Nondisclosure - 3 NOTE on residential property sales courts liberally applied the elements some require disclosure of known, hidden defects many states now have statutes that mandate certain residential real estate disclosures

18. Last Slide! Duties to dislose 1. To make actual representations truthful a. fix misleading half-truth b. correct a prior statement now known to be false 2. To protect people who need and reasonably expect disclosure of risks. A. Fiduciary and relationships of dependence b. Other? E.g. RS2d advocates duty to fix known errors of P if P would reasonably expect disclosure (custom, etc.) Imply duty to tell seller it’s a Stradivarious? Stradivarious? RS 551, ill 6 says no, but line is impossible to draw, in my view.Stradivarious? RS 551, ill 6 says no, but line is impossible to draw, in my view.

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