Fraudulent Misrepresentation Lawyers

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What Is Fraudulent Misrepresentation?

Misrepresentation in general is a legal term that means "a false statement of fact that has the effect of inducing someone into a contract." For example, telling someone a stereo is "practically new" so that they buy it, when it is in fact 5 years old and heavily used. Fraudulent misrepresentation is one of the three recognized varieties of misrepresentations in contract law.

Basically, it means that you not only lied or misrepresented something about a transaction, but that you did it on purpose, in order to trick the other party. Therefore, it is the most serious of all the types of misrepresentation and has the worst penalties.

What Constitutes Fraudulent Misrepresentation?

There are six elements that must be satisfied:

  1. Someone must makes a false representation
     
  2. The misrepresentation is "material to the transaction," which means it must be in regards to the transaction at hand (i.e. if you are selling a bracelet and lie about something completely unrelated, like having a house in the Hamptons, the buyer can't sue you for fradulent misrepresentation.)
     
  3. The misrepresentation is made with knowledge that is false, OR with reckless disregard as to whether or not it's true. Either you have to know you are lying, or be saying something that you are not technically sure is a lie, but you have no reason to believe it's true.  (i.e. if the seller found the bracelet on the street, he cannot tell the buyer that Brad Pitt used to own it, even if that is technically possible.)
     
  4. The misrepresentation is made with the intention of inducing the other party to act or to refrain from acting. Basically, you must be intentionally trying to affect your transaction with your lie.
     
  5. The other party has to rely on the lie (the buyer cannot sue you for lying about the bracelet if he doesn't buy it).
     
  6. The lie must also proximately cause the other party to suffer damages. This means the buyer must be actually harmed by the final transaction. If the seller lies and says the bracelet is made of plastic, when it's actually made of gold, the Buyer probably can't sue (and why would he?)

It should be noted, however, that the representation need not be in the form of a positive assertion. It can be anything that is designed to deceive the other party, even including simple gestures, innuendos, half-truths, or even silence.

Remedies for Fradulent Misrepresentation

Misrepresentations are civil offenses, meaning you can only sue for them in civil court (the criminal equivalent of this offense is called "false pretenses"). The general remedy in civil court for all types of misrepresentations is that of rescission. This means the court will act like the transaction or contract never existed, and everyone goes back to the way they were.

Example: You sell someone a stereo for $50 telling them that it is fully functional (which you think is true), and it turns out to be broken.  The deal is rescinded; the buyer returns the stereo, and you return the money.

However, fradulent misrepresentation requires intent on the part of the perpetrator, so it is considered more serious than the other two types of misrepresentation (Innocent and Negligent). Therefore the court also allows damages, meaning you have to pay for any losses suffered by the buyer for relying on your lie. This is true even if the losses suffered by the seller were completely unforeseeable.  

Example: You sell someone a stereo for $50 telling them that it is fully functional, when you know that it is actually totally broken. The buyer, who is a professional DJ, now cannot perform his job, and is fired. Because you knew the stereo was broken, the court can require you to pay back the DJ for the loss of his job.

How Can an Attorney Help?

While fraudulent misrepresentation is the most serious of the three types, it is also the most difficult to prove. Demonstrating someones "intent" is always a tricky task, since most people will simply say "I didn't know it was a lie at the time!" If you have been the victim of a misrepresentation, an experienced contract lawyer will be essential in pursuing the case. Each state has its own laws regarding the topic, so a good attorney will know how best to proceed and can explain what kind of remedies you can expect.

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Last Modified: 11-13-2013 02:55 PM PST

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