Chapter 14: Fraud, Misrepresentation, and Business Torts

What are the elements of malicious prosecution?

A defendant whose motives are for some purpose other than bringing the plaintiff to justice and who, without probable cause, institutes criminal proceedings against another commits malicious prosecution (Restatement [Second] of Torts § 653). For the plaintiff to recover, the proceedings must conclude in the plaintiff's favor and the defendant must actively participate in instigating the prosecution.

What are the elements of interference with existing contractual relations?

A person commits interference with existing contractual relations by inducing another to breach a contract with the plaintiff. The defendant's interference must be intentional (negligence is not sufficient) and improper.

What remedies are available to a plaintiff alleging private nuisance?

A plaintiff alleging private nuisance may seek either compensatory damages or an injunction. If the nuisance is likely to be permanent, the plaintiff can recover for both past and prospective damages in the same action.

How does a private nuisance differ from a trespass?

A trespass consists of an interference with the plaintiff's right to possession of his or her property; a nuisance consists of an interference with the plaintiff's right to enjoy and use his or her property. A nuisance can occur, therefore, even if nothing physically enters the plaintiff's property. Furthermore, the fact that the interference must be substantial also differentiates a nuisance from a trespass.

What is the difference between a reliance measure of damages and a benefits-of-the-bargain measure?

Damages for misrepresentation may be measured in two ways. The plaintiff may be asked to be put in the position he or she was in before the misrepresentation (referred to as the "reliance measure"). Alternatively, the plaintiff may be asked to be put in the position he or she would have been had the misrepresented facts been true (referred to as the "benefits-of the bargain measure"). The majority of courts use the latter measure of damages.

Under what circumstances is someone liable for abuse of process?

If an individual initiates a criminal or civil proceeding based on probable cause and on the basis of permissible motives, he or she may still be liable for abuse of process if that individual uses certain litigation devices for improper purposes. Using a subpoena, for example, to harass someone or to induce that person to settle rather than for its practical purpose of obtaining testimony could be considered an abuse of process.

Is a defendant liable if a plaintiff relies on the defendant's misrepresentation but also conducts an investigation of his or her own?

If the plaintiff relies totally or almost totally on his or her own investigation, the plaintiff will be deemed not to have relied on the seller's misrepresentation. If, however, the seller's misrepresentation is a substantial factor in inducing the plaintiff's reliance, the reliance requirement will be fulfilled and the seller will be found liable.

Is nondisclosure grounds for misrepresentation? If yes, under what circumstances?

In the modern view nondisclosure may be considered concealment and grounds for misrepresentation when the defect is a latent defect (not visible to the buyer).

What is the relationship between deceit and misrepresentation?

Misrepresentation as a distinct cause of action arose out of the common law action of deceit. Intentional misrepresentation corresponds to what was known as "deceit" or "fraud" under the common law.

In what ways do the courts treat negligent misrepresentation differently than they do intentional misrepresentation?

Other than intent, the requirements for an action of negligent misrepresentation are essentially the same as those for intentional misrepresentation. The courts are most inclined to allow recovery for negligent misrepresentation when the defendant makes false statements during the course of the defendant's business or profession or has a pecuniary interest in the transaction at hand.

To what group of persons is a defendant liable if the defendant makes a misrepresentation?

Presently a plaintiff can recover if he or she is a member of a class that the defendant could reasonably expect to learn of and rely on the misrepresentation.

What state of mind is required for intentional misrepresentation?

Proof of intentional misrepresentation also requires showing that the defendant knew of the falsity of the statement or acted with reckless disregard to the truth.

What is considered a "substantial interference"?

Substantial interference occurs when the plaintiff is injured or the plaintiff's property is damaged. The interference may also be substantial if the plaintiff is inconvenienced or subjected to unpleasant sensory awareness, such as obnoxious odors or blaring sounds. The plaintiff must show that a person of normal sensitivity would be seriously bothered by the defendant's conduct.

What are the basic elements of misrepresentation?

The defendant misrepresents something with the intent of inducing the plaintiff's reliance on that misrepresentation. The defendant knows that the representation is false or acts with reckless indifference to the truth. The plaintiff justifiably relies on the defendant's misrepresentation. The plaintiff suffers damages stemming from this reliance.

What is the difference between a private and public nuisance?

The essence of a public nuisance is an interference with "a right common to the general public" (Restatement [Second] of Torts § 821B [1]). A private nuisance, in contrast, is an unreasonable interference with the plaintiff's use and enjoyment of his or her land (Restatement [Second] of Torts§ 822).

How do the courts treat transactions involving parties having a fiduciary relationship differently than transactions that are done at "arm's length"?

The law imposes a more demanding obligation to disclose if there is a fiduciary relationship between the parties than if a transaction occurs at "arm's length" (i.e., no special relationship exists between the parties).

What do plaintiffs have to prove in terms of causation in a case alleging misrepresentation?

The plaintiff in a suit for misrepresentation must prove that he or she sustained actual damages that were proximately caused by the defendant's misrepresentation.

What can a plaintiff recover in a tort for interference with existing contractual relations?

The plaintiff may certainly recover for pecuniary losses he or she sustains as a result of the interference and also, according to some courts, may be allowed to recover for emotional harm. The plaintiff can recover for breach of contract against the person the defendant induced to breach the contract.

What are the elements of a private nuisance?

The plaintiff must prove that the use and enjoyment of his or her land was substantially interfered with and that the defendant's conduct was either negligent, intentional, or abnormally dangerous.

What are the elements of a public nuisance?Why must a plaintiff prove that the damages suffered are peculiar to him or her?

The plaintiff must show that the public at large was actually injured or was exposed to the possibility of injury. The harm must be substantial. The rationale for this rule is that wrongs to the community as a whole should be redressed by the community's representatives, to avoid duplication of legal actions.

How does intentional misrepresentation differ from negligent and innocent misrepresentation?

The requirements for an action of negligent misrepresentation are essentially the same as those for intentional misrepresentation, with the exception of the intent requirement. A person who makes an intentional misrepresentation is liable to anyone whom he or she reasonably expects to learn about the statement. A person who makes a negligent misrepresentation is liable only to those whom he or she intends to reach with the information or those he or she knows the recipient of the information intends to reach. Nevertheless, as long as the defendant is aware that a negligent misrepresentation will be passed on to a limited number of people, the defendant will be liable even if unaware of their precise identity. The courts deny recovery, however, when the class of people intended to be reached by the negligent misrepresentation is not limited.

How does the tort of wrongful institution of civil proceedings differ from malicious prosecution?

The tort of malicious prosecution normally applies to criminal proceedings. However, most states allow similar actions for wrongful institution of civil proceedings. The elements are essentially the same as for malicious prosecution, although civil proceedings may encompass administrative proceedings, bankruptcy proceedings, insanity proceedings, as well as ordinary civil lawsuits. Proving lack of probable cause in a civil case is more difficult than in a criminal case because one can initiate civil proceedings with far less certainty of the facts than in a criminal proceeding.

Under what circumstances is a plaintiff justified in relying on a defendant's opinion?

Traditionally, courts have been reluctant to allow plaintiffs to recover on the basis of any of the defendant's statements that could be characterized as opinion. In some circumstances, however, such reliance may be justified. If a defendant and plaintiff have a fiduciary relationship, or if the defendant has worked to secure the confidence of the plaintiff, the plaintiff may be justified in relying on the defendant's opinion. Also, if the defendant purports to have special knowledge that the plaintiff does not have, the plaintiff may be justified in relying on the defendant. Similarly, if the defendant is aware that the plaintiff is particularly gullible or unintelligent and will be easily misled by any kind of opinion, a justifiable reliance will more likely be found.