SECTION OPENER / CLOSER: INSERT BOOK COVER ART Fraud and Misrepresentation Section 6.1

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Section 6.1 Fraud and Misrepresentation Section 6.2 Mistake, Duress, and Undue Influence 6 Chapter Genuine Agreement

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement What You’ll Learn How to identify the elements of fraud (p. 128) How to distinguish between fraud and concealment (p. 129)

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement What You’ll Learn How to distinguish between fraud and innocent misrepresentation (pp. 128 and 132)

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement What You’ll Learn How to distinguish between the remedy available for fraud and the remedy available for misrepresentation (pp. 128 and 132)

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Why It’s Important Learning the elements of fraud may prevent you from being victimized or help you claim your rights if you are defrauded.

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Legal Terms fraud (p. 128) rescind (p. 128) material fact (p. 129) concealment (p. 129) misrepresentation (p. 132)

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Fraud False Representation of Fact Representation Known to Be False False Representation Intended to Be Relied Upon Section Outline Defective Agreements

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Innocent Misrepresentation Fraud, continued False Representation Actually Relied Upon Resulting Loss

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement If the offeror makes a valid offer, and the offeree has made a valid acceptance, then a genuine agreement has been reached. The courts describe this type of agreement as “a meeting of the minds.” Genuine Agreement

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement 6.1 Several circumstances might create a defective agreement: Fraud Misrepresentation Mistake Duress Undue Influence

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Pre-Learning Question How would you define fraud?

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Fraud Fraud is a deliberate deception intended to secure an unfair or unlawful gain.

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement You may rescind, or cancel, the contract. You may sue for money damages. Remedies for Fraud

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement To succeed in a lawsuit for fraud, the following five elements must be demonstrated: The Elements of Fraud 1.A false representation of fact. 2.Knowledge of the falsity by the party making the false representation.

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement 3.Intent to deceive by the party making the false representation. 4.Reasonable reliance by the innocent party. 5.An actual loss must be suffered by the innocent party. The Elements of Fraud

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement False Representation of Fact Fraud requires a false representation of a material, existing fact. A material fact is one that is important; it matters to one of the parties.

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement False Representation of Fact Under some circumstances, individuals can make false representation by choosing not to reveal important information. This is known as concealment, or passive fraud.

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Representation Known to Be False To be held accountable for fraud, the party making the false representation must be aware that it is false. This may be shown by: Proving actual knowledge Showing the statement was made recklessly

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement False Representation Intended to Be Relied Upon To prove fraud, the person making the misrepresentation must intend that the other party will rely upon the information as part of the contract negotiations.

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement False Representation Actually Relied Upon To prove fraud, the false representation must be reasonably relied upon by the other party when the agreement is made.

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Resulting Loss In proving fraud, the innocent party must show some monetary loss.

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Pre-Learning Question How is misrepresentation different from fraud?

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Innocent Misrepresentation Misrepresentation is the act of making an innocent statement that turns out to be false, when the person honestly believed the statement was true at the time it was made.

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Remedy for Misrepresentation The right to rescind the contract. You may not win damages.

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement After Mrs. Grayson died, her neighbor, Joel, asked her son, Tom, if he would sell her TV. Before giving Tom $100, Joel asked, “It works, doesn’t it?” and Tom answered, “As far as I know.” However, when Joel plugged it in, it did not work.

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Can Joel claim there was false representation? Why or why not?

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement ANSWER Probably not. “As far as I know,” would probably be considered innocent misrepresentation.

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Reviewing What You Learned 1. 1.What are the elements of fraud? Section 6.1 Assessment

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Reviewing What You Learned There must be a false representation of a material fact. The party making the representation must know that it is false. Section 6.1 Assessment Answer

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Reviewing What You Learned The false representation must be made with the intent that it be relied upon. The innocent party must reasonably rely upon the false representation. Section 6.1 Assessment Answer

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Reviewing What You Learned The innocent party must suffer some monetary loss. Section 6.1 Assessment Answer

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Reviewing What You Learned 2. 2.What is the difference between fraud and concealment? Section 6.1 Assessment

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Reviewing What You Learned Concealment is passive fraud. Section 6.1 Assessment Answer

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Reviewing What You Learned 3. 3.What is the difference between fraud and innocent misrepresentation? Section 6.1 Assessment

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Reviewing What You Learned In fraud, the defrauding party knows of the false representation. In misrepresentation the false statement is made innocently. Section 6.1 Assessment Answer

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Reviewing What You Learned 4. 4.What is the difference between the remedy available for fraud and the remedy available for misrepresentation? Section 6.1 Assessment

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Reviewing What You Learned Damages are a possible remedy in a fraud case. Section 6.1 Assessment Answer

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Section 6.1 Assessment Critical Thinking Activity Fraud Why do courts permit fraud to disrupt genuine agreement in a contractual setting?

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Section 6.1 Assessment Answers will vary, but should recognize that fraud leads to a defective agreement. Critical Thinking Activity Answer Fraud

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Section 6.1 Assessment Legal Skills in Action Too Good to Be True? You recently received a phone call from a travel agency offering a vacation package to Europe for less than $200.

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Section 6.1 Assessment Legal Skills in Action Too Good to Be True? To take advantage of the offer, you were told to send $200 in cash within 24 hours or to supply a credit card number on the spot.

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Section 6.1 Assessment Legal Skills in Action Too Good to Be True? In small groups, discuss whether this sounds like a case of potential fraud. Begin by listing the elements of fraud.

Understanding Business and Personal Law Fraud and Misrepresentation Section 6.1 Genuine Agreement Section 6.1 Assessment Legal Skills in Action Answer Too Good to Be True? Discussions will vary, but should compare the elements of fraud to the information given about the vacation offer.

SECTION OPENER / CLOSER: INSERT BOOK COVER ART Fraud and Misrepresentation End of Section 6.1