Contracts Ch. 3.E. Misrepresentation

1. ContractsCh. 3.E. Misrepresentation Misrepresentation

2. § 159. Misrepresentation Defined A misrepresentation is an assertion that is not in accord with the facts.

3. The Defense of Misrepresentation • Actionable act of deception • Deception was material to transaction or fraudulent (intent to deceive) • Party asserting defense was justified in relying upon deception. Misrepresentation

4. What constitutes a deceptive act? Misrepresentation

5. §161. WHEN NON-DISCLOSURE IS EQUIVALENT TO AN ASSERTION A person’s non-disclosure of a fact known to him is equivalent to an assertion that the fact does not exist in the following cases only: (a) where he knows that disclosure of the fact is necessary to prevent some previous assertion from being a misrepresentation or from being fraudulent or material.

6. §161. WHEN NON-DISCLOSURE IS EQUIVALENT TO AN ASSERTION (b) where he knows that the disclosure of the fact would correct a mistake of the other party as to a basic assumption on which that party is making the contract and if non-disclosure of the fact amounts to a failure to act in good faith and in accordance with reasonable standards of fair dealing. (c) where he knows that disclosure of the fact would correct a mistake of the other party as to the contents or effect of a writing, evidencing or embodying an agreement in whole or in part.Party A has not caused.

7. §161. WHEN NON-DISCLOSURE IS EQUIVALENT TO AN ASSERTION (d) where the other person is entitled to know the fact because of a relation of trust and confidence between them.

8. When is deception material and reliance justified? Misrepresentation

9. Are these deceptions material? Was reliance reasonable? • Weintraub seller fails to disclose that rose bush in backyard is dying. • Seller tells buyer that windows are in mint condition. Half are broken on house tour. • Car salesman says car • has 8 cylinders, but it has 4. • is “best money can buy.” • is “the safest car made in America,” but it in fact scored near bottom in all crash tests. • Tenant tells Landlord he is selling gifts and varieties but is really selling “adult books” • Dance instructor tells Vokes that she is a great dancer. Misrepresentation

10. What amounts to a misrepresentation? An assertion that is not in accord with the facts and can include: • Affirmative statement not in accord with facts • Concealment of true facts (160) • Non-disclosure in circumstances where disclosure is required (161) • Fact vs. opinion – line isn’t clear or always drawn. (168) Misrepresentation

11. Misrepresentation Degree of Deceit Non DisclosureVisible Non DisclosureLatent Half-Truth Concealment Lie Front PorchEaten Swinton No TermitesThis Year PatchDamage No Termites Vokes Weintraub Stroup Stambovsky

12. Consequences of Misrepresentation? • Scenario 1: • If misrepresentation is “fraudulent” [162(1)] or “material” [162(2)] and hearer is justified in relying upon it, • Then K is voidable by hearer. [164(1)] • Scenario 2: • If misrepresentation is NEITHER “fraudulent” nor “material” but hearer is justified in relying upon it • Then innocent party is limited to damages caused. Misrepresentation

13. A Short Memory • In overruling Swinton v. Whitinsville Savings Bank, the Weintraubcourt said: “Our courts have come a long way since the days when the judicial emphasis was on formal rules and ancient precedents rather than on modern concepts of justice and fair dealing.” Misrepresentation

14. Summa Theologica II-II.77.3 It is always unlawful to give anyone an occasion of danger or loss, although a man need not always give another the help or counsel which would be for his advantage in any way; but only in certain fixed cases, for instance when someone is subject to him, or when he is the only one who can assist him. Now the seller who offers goods for sale, gives the buyer an occasion of loss or danger, by the very fact that he offers him defective goods, if such defect may occasion loss or danger to the buyer--loss, if, by reason of this defect, the goods are of less value,

15. Summa Theologica II-II.77.3 and he takes nothing off the price on that account--danger, if this defect either hinder the use of the goods or render it hurtful, for instance, if a man sells a lame for a fleet horse, a tottering house for a safe one, rotten or poisonous food for wholesome. Wherefore if such like defects be hidden, and the seller does not make them known, the sale will be illicit and fraudulent, and the seller will be bound to compensation for the loss incurred.

16. Summa Theologica II-II.77.3 Objection 4 • Now sometimes the price would be lowered for some other reason, without any defect in the thing sold: for instance, if the seller carry wheat to a place where wheat fetches a high price, knowing that many will come after him carrying wheat; because if the buyers knew this they would give a lower price. But apparently the seller need not give the buyer this information. Therefore, in like manner, neither need he tell him the faults of the goods he is selling.

17. Summa Theologica II-II.77.3 Reply to Objection 4 • The defect in a thing makes it of less value now than it seems to be: but in the case cited, the goods are expected to be of less value at a future time, on account of the arrival of other merchants, which was not foreseen by the buyers. Wherefore the seller, since he sells his goods at the price actually offered him, does not seem to act contrary to justice through not stating what is going to happen.

18. Summa Theologica II-II.77.3 Reply to Objection 4 • If however he were to do so, or if he lowered his price, it would be exceedingly virtuous on his part: although he does not seem to be bound to do this as a debt of justice. of the goods he is selling.