Over the past several weeks, this blog has provided some basic information about possible legal remedies for when another party is harmfully dishonest in a business transaction. We've talked about fraud and trade disparagement; now we're going to talk about another New York business tort: fraudulent misrepresentation.
Fraudulent misrepresentation involves a party making a false statement to another party, causing a deal between the two parties to be based on a false premise. If the false premise has a material effect on the deal, the law considers the contract between the parties to be invalid. The misrepresentation can be communicated in a number of formats, including writing, speech, a gesture, or even silence.
In order to win, a plaintiff must prove a number of things in a fraudulent misrepresentation case. The plaintiff must prove that a representation was made and that it was false. Furthermore, it is necessary to prove that the representation was known to be false when it was made or that it was made recklessly without knowledge of its truth. It is necessary to prove that the representation was made with the intention that the other party rely on it and that the other party did rely on it. Finally, the plaintiff must prove that it suffered damages as a result of its reliance.
If a plaintiff proves a case of fraudulent misrepresentation, it may be entitled to rescission of the contract. This means that the plaintiff can choose to breach the terms of the contract without damages. A plaintiff may also be entitled to receive damages consisting of actual losses stemming from the misrepresentation. If the plaintiff has not suffered actual damages, it probably will not be able to recover damages.
Source: FindLaw, "Fraudulent Misrepresentation," accessed on Nov. 24, 2017