Misrepresentation

Negligent Misrepresentation - Damages

Sole economic loss is recoverable - NOT PI or property damage

Defenses

1. Assumption of risk - Defense for innocent and negligent misrepresentation, but NOT fraud. 2. Contributory negligence - Defense to negligent misrepresentation only 3. Comparative fault - NOT a defense in fraud case, IS defense in negligent misrepresentation case, and undetermined whether it is defense in innocent misrepresentation

Intentional Misrepresentation - Fraudulent concealment of material facts: 4 requirements -

1. D had the duty to disclose that information to P. Legal obligation to speak up 2. D intentionally concealed or suppressed that information for the purpose of defrauding P. 3. P was unaware of that fact and would not have gone through with the transaction had he known about it. 4. As a result of the concealment, P was damaged. P was harmed/suffered damage as a result

3 types of misrepresentation

1. Intentional misrepresentation/ fraud/deceit 2. Negligent misrepresentation 3. Innocent misrepresentation

Intentional Misrepresentation - 1. Misrepresentation of material fact - 4 parts of this element:

1. Materiality - Fact must be material. it is material if the fact would have influenced a reasonable person in his business transactions, or if D knew that the fact was important to P. 2. Face v. sales talk/opinion - Must be FACT involved; no sales talk, puffing, etc. 3. Statements of law - statements of law are held to be statements of opinion, EXCEPT when that statement is made by lawyer. 4. Promissory fraud/inducement - A promise to do a certain thing in the future is regarded as a representation of fact as long as the promisor NEVER had the intent to make good on the promise at the time he made it. EXCEPTION to this - If the promisor had the intent to make good on the promise at the time he made it, but thereafter changes his mind, that is not fraud. You are allowed to change your mind.

3. Innocent Misrepresentation - Defined:

D can be liable for misrepresenting something even if he does not know that what he is misrepresenting is false, and is not negligent in doing so.

Innocent Misrepresentation - Is defendant liable solely for economic loss?

D is not liable for solely economic loss. Plaintiff can recover on PI or property damage in innocent misrepresentation. However, if this PI or property damage is accompanied by economic loss, then the economic loss can also be recovered. Just cannot be recovered alone.

Intentional Misrepresentation/Fraud/Deceit defined

Defendant acts fraudulently when he INTENTIONALLY misrepresents a material fact in order to mislead the plaintiff and the plaintiff reasonably relies on the misrepresentation

Intentional Misrepresentation - 3. Scienter

Defendant made the misrepresentation either knowing it was false OR he did so recklessly (he didn't know if it was true or not. Reckless disregard for the truth) SCIENTER IS KEY IN FRAUD CASE

Intentional Misrepresentation - 6. Reasonable reliance - reliance by third parties

Defendant makes a representation to one person, but a third person relies on that information to their detriment. Lack of privity WILL NOT preclude liability for a fraud claim if it was foreseeable that a third person would have relied on that information

2. Negligent Misrepresentation

Defined: When D did not mean to make the misrepresentation, but negligently did so. Even if D acted in good faith, he can still be held liable.

Intentional Misrepresentation - 2. Falsity

Fact at issue must have been false

Intentional Misrepresentation - Fraudulent concealment of material facts: Defined -

Fraudulent concealment is the suppression of material facts (silence) and can constitute a representation for purposes of fraud.

Intentional Misrepresentation - 4. Intent to induce reliance

Intended that the plaintiff rely on that information

Negligent Misrepresentation - Lack of privity

Lack of privity is NOT a bar to recovery as long as it is reasonably foreseeable that the third party would use and rely on that information to their detriment.

Negligent Misrepresentation - Restatement of Torts Section 552 - Liability for guidance in business transactions

Liability if they are guiding them in a business transaction (not personal transaction) - One who, in the course of BUSINESS or profession of employment, supplies false information for the guidance of others in their BUSINESS transactions is subject to liability for the pecuniary (monetary) loss caused to them by their justifiable reliance on that information. (Think back to lawyer case and the room with the camera. He was guiding him on a personal level, so he was not held liable.)

Intentional Misrepresentation - 6. Reasonable reliance - Does plaintiff have duty to investigate?

P does NOT have to investigate the truth of what he was told, but reliance must still be reasonable

Intentional Misrepresentation - 6. Reasonable reliance

Plaintiff has to be objectively reasonable in their reliance. P's reliance must be justifiable. You cannot rely on what you know is incorrect.

2. Negligent Misrepresentation - Elements

The elements are the same as intentional misrepresentation, except it lacks scienter. The scienter requirement is replaced with the breach of the reasonable person standard of care. Liability can be imposed even if he thought he was representing the truth. If he was negligent, then there is liability. Since it does not have the scienter requirement, punitive damages typically NOT recoverable on negligent misrepresentation case.

Intentional Misrepresentation - 7. Damages

There cannot be an award of nominal damages in a fraud case. P must show actual damages. 2 ways compensatory damages measured for intentional misrepresentation 1. Benefit of Bargain Rule (TN & Majority Follows) - Court will award the P the difference between the market value of what P received and the value of the item had the misrepresentation been true. 2. Out of Pocket Rule (Minority Rule) - Difference in actual price P paid for the thing at issue (may or may not be market value) and the market value of the item as it was received. Punitive damages available in intentional misrepresentation (fraud) - remember: Intentional, reckless, malicious, or fraudulent conduct are 4 scenarios when punitive damages are available.

Intentional Misrepresentation - Is there typically a duty to disclose material facts?

Typically no. Silence and inaction can amount to a representation, the general rule is that neither ordinarily amounts to a misrepresentation. There is USUALLY no duty to disclose material facts. 3 exceptions to this.

Is representation of the material fact necessary for intentional misrepresentation?

YES. there must be representation of the material fact (promise). The form of representation does not really matter: oral, written, conduct. Example: If the car salesman is turning back the odometer, he is acting out with conduct the material fact he is misrepresenting.

Elements of intentional misrepresentation

1. Misrepresentation of material fact 2. Falsity 3. Scienter 4. Intent to induce reliance 5. Causation 6. Reasonable reliance and 7. Damages

Intentional Misrepresentation - 3 exceptions to no duty to disclose material facts:

1. Parties have fiduciary/confidential relationship between them. Doctor/patient, Partners in partnership, lawyer/client, etc. 2. Where a party knows of the material fact and knows the other side cannot reasonably discover that fact. 3. When new information comes to light that makes a represented fact untrue even though it was true at the time it was made. (Think back to the example with the couple selling the house)

Tennessee Consumer Protection Act

Statutory cause of action - "Unfair of deceptive" trade practices If P can prove that the unfair or deceptive conduct was willful or knowing (fraud) then he can recover TREBLE (triple) his damages plus attorney's fees. If he cannot prove it was willful or knowing conduct and only negligent, then he can recover ACTUAL damages (not triple) plus attorney fees

Intentional Misrepresentation - 5. Causation

Plaintiff must have relied on that information

Innocent Misrepresentation - Physical harm

Restatement of Torts 402(b) - If someone sells a chattel and that chattel causes PI or property damage, and as part of that sale, the seller made an innocent misrepresentation, the seller IS LIABLE for that physical harm.