FRAUD &

MISREPRESENTATION
 Valid Contract

A contract can be term as valid, if the offeror makes a valid offer and the
offeree has made a valid acceptance, then a genuine agreement has been
reached, All 3 elements- consideration, capacity and legality- must also be
met for it to be a valid contract This is called a meeting of the minds.
However, several items might create a turn an agreement into a defective
one:
fraud
misrepresentation
mistake
undue influence.
 FRAUD

Fraud: a deliberate deception intended

to secure an unfair or unlawful gain.
If you have entered into a contract by
fraud you can:
Rescind (cancel the contract)
Sue for money
 FRAUD (contd.)

To succeed in a lawsuit for fraud, the following 5 elements must be

demonstrated:
1. There must be a false representation of fact.
2. The party making the representation must know it is false.
3. The false representation must be made with the intent that it be relied
upon.
4. The innocent party must reasonably rely upon the false representation.
5. The innocent party must actually suffer some monetary loss.
 False Representation of Fact

Fraud requires a false representation of a material, existing fact.

Material fact- A fact that is important; it matters to one of the parties. It
cannot be a promise of something or an opinion.
Concealment- NOT revealing something is also false representation- (Im
selling my house but I intentionally do not say by roof leaks every time it
rains)
What is allowed? Sales puffing, aka sales puffery. This car is really
flashy, itll attract lots of girls Keep it zipped shut!
 Representation Known to Be
False

To be held accountable for fraud, the party making the false

representation MUST be aware that the representation is
false.
Example: Justin purchases a used car from Jazmine. She
assures Justin that the car has never been in an accident.
While looking through the glove box a week after purchasing
the car, he finds a receipt for car repairs that indicate the
car was in a major accident. As a result, Justin is able to
pursue a claim of false representation.
False Representation Intended to Be
Relied Upon

To prove fraud, one must show that the false representation was
made with the intent that it be relied upon. That is, the person
making the misrepresentation must intend that the other party rely
upon the information as part of the contract negotiations.
Example: If you asked me if my diamond ring was real
and I say yes, even though it wasnt, and then you went
out and bought the same ring thinking it was real
because I said it was, it wasnt fraud because I didnt
make the statement with the intent that this person
would rely on it. I knew I was lying but how was I to know
you were going to buy a ring with that intent?
 False Representation Actually Relied
Upon

If fraud is to be proven, the false representation must be reasonably

relied upon by the other party when the agreement was made. Sometime
people make misrepresentations to others who pay no attention to those
misrepresentations.

Example: Suppose that X was selling me his 1964 Ford

Mustang, but when I was purchasing it I had my friend
with me who is a car expert that said the car is actually
a 1966 and worth far less than what X was selling it to
me for. I still bought the car knowing that it wasnt a 64
anyway. I could not later sue X for fraud b/c I did not
actually rely on X false statement.
 Resulting Loss

Unless you suffer a monetary loss, you could not win a lawsuit
for fraud.
Example: Y and I agree that if she vacuums my room after
school and sanitizes the desks I will give her my I-phone.
Upon receiving the I-phone she realizes that it doesnt stay
charged for more than 30 minutes at a time. Because she
suffered no monetary loss, she could not sue me for fraud.
 MISREPRESENTATION

Misrepresentation- an untrue statement of facts that the law gives you

the right to rescind the contract- but not seek monetary damages.
INNOCENT MISREPRESENTATION
Sometimes a person will make an innocent statement that turns out to
be false. However, that person honestly believed the statement was
true at the time.
Example: Suppose A sells B his mountain bike for 4000 and honestly
believe that the bike is in pristine condition. B finds out that the tire is
severely misaligned in front and needs a 2000 repair. In this case B
could ask for his money back, but could not sue A for damages,
because A truly believed that it was in good condition.
THANK YOU
Prepared by:
Apporv Srivastava
Shubh Tulsyan
Suyash Saxena
Shivam Uplaksh
Hazrat Bilal Mujadadi