Fraudulent Misrepresentation

Overview

Under contract law, a plaintiff can recover compensatory damages against a defendant when a court finds that the defendant has committed fraudulent misrepresentation. Courts will typically find that a defendant has committed fraudulent misrepresentation when six factors have been met:

  1. a representation was made
  2. the representation was false 
  3. that when made, the defendant knew that the representation was false or that the defendant made the statement recklessly without knowledge of its truth
  4. that the fraudulent misrepresentation was made with the intention that the plaintiff rely on it
  5. that the plaintiff did rely on the fraudulent misrepresentation
  6. that the plaintiff suffered harm as a result of the fraudulent misrepresentation

Recovery

“Today, the most common measure of compensatory damages for the tort of fraudulent misrepresentation is benefit-of-the-bargain damages—the same as expectation interest compensatory damages for breach of contract. In the fraudulent misrepresentation context, the benefit-of-the bargain measure of damages allows the plaintiff to recover the difference in value of the property as represented by the defendant and the value of the property the plaintiff ultimately received. Under this measure, the plaintiff ‘will have no loss’ and ‘will achieve any economic gains he would have had if the representations had been correct.’” 

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