Also known as: fraudulent misrepresentations · fraudulent misrep
Written by attorneys · grounded in primary & secondary sources — see below
A false assertion of fact made with knowledge of its falsity or reckless disregard for its truth and with intent to induce reliance. The recipient must justifiably rely on the assertion and suffer pecuniary loss as a result.
Fiona Foster purchased a warehouse from Fabian Flynn after Flynn stated that the roof was fully watertight. Foster could have hired an inspector but chose not to. When leaks appeared, Foster sued for fraudulent misrepresentation. The court held that Foster's reliance remained justified even though an investigation would have revealed the falsity.
Felicity French bought equipment from Forrest Falconer after he claimed the machines were new. French already knew from prior dealings that the machines were used. When the equipment failed, French sued. The court dismissed the claim because French could not justifiably rely on a statement she knew was false.
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Frederick Ferguson purchased shares from Freeman Engineering after its CEO stated that earnings would double. Ferguson suspected the CEO had an incentive to inflate the numbers yet still relied on the statement. When earnings fell, Ferguson sued. The court allowed recovery because reliance on a factual misrepresentation can be justified even when the recipient believes the maker has an adverse interest.
Felix Franco bought land from Flagship Logistics after its agent opined that the soil was ideal for farming. The agent had no special expertise and stood in no fiduciary relation to Franco. When the soil proved unsuitable, Franco sued. The court rejected the claim because reliance on a bare opinion is not justified absent special knowledge or a trust relationship.
Franklin Foundry retained an independent appraiser to value a factory before purchase. The appraiser stated the facility was worth twice the asking price. Franklin relied on the appraisal and closed the deal. When the true value proved far lower, Franklin sued the seller. The court permitted recovery because the opinion came from a person Franklin reasonably believed to be disinterested and the valuation was material.
Fulton Shipping bought a vessel after the seller falsely represented that the hull had been recently inspected. Fulton failed to review readily available inspection records. When the hull failed, Fulton sued. The court held that Fulton's contributory negligence did not bar recovery because the reliance on the misrepresentation was otherwise justifiable.
The elements are a false representation of fact, opinion, intention, or law made with scienter, intent to induce reliance, justifiable reliance by the recipient, and resulting pecuniary loss. Scienter exists when the maker knows the assertion is false, lacks confidence in its truth, or knows there is no basis for it.
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No. The recipient of a fraudulent misrepresentation of fact is justified in relying on its truth even if an investigation would have revealed the falsity, provided the falsity is not obvious or actually known.
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Reliance on a statement of opinion is justified when the opinion is that of a person the recipient reasonably believes to be disinterested and the fact to which the opinion relates is material, or when the maker purports to have special knowledge or stands in a fiduciary relation.
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No. One who justifiably relies on a fraudulent misrepresentation is not barred from recovery by contributory negligence in failing to discover the falsity.
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…claim nor, in this case, under promissory estoppel. We affirm the court of appeals' dismissal of plaintiff's claim based on fraudulent misrepresentation, and reverse the court of appeals' allowance of the breach of contract claim. Claiming a reporter's promise to keep his name out of a news story was broken, plaintiff Dan Cohen sued…