LAW 505-002 – Contracts I

Fraud


Restatement Second of Contracts § 159

Misrepresentation Defined

View on LexisNexis

A misrepresentation is an assertion that is not in accord with the facts.

Restatement Second of Contracts § 160

When Action Is Equivalent to an Assertion (Concealment)

View on LexisNexis

Action intended or known to be likely to prevent another from learning a fact is equivalent to an assertion that the fact does not exist.

Restatement Second of Contracts § 161

When Non-Disclosure Is Equivalent to an Assertion

View on LexisNexis

A person's non-disclosure of a fact known to him is equivalent to an assertion that the fact does not exist in the following cases only:

  1. where he knows that disclosure of the fact is necessary to prevent some previous assertion from being a misrepresentation or from being fraudulent or material.
  2. where he knows that disclosure of the fact would correct a mistake of the other party as to a basic assumption on which that party is making the contract and if non-disclosure of the fact amounts to a failure to act in good faith and in accordance with reasonable standards of fair dealing.
  3. where he knows that disclosure of the fact would correct a mistake of the other party as to the contents or effect of a writing, evidencing or embodying an agreement in whole or in part.
  4. where the other person is entitled to know the fact because of a relation of trust and confidence between them.
Restatement Second of Contracts § 162

When a Misrepresentation Is Fraudulent or Material

View on LexisNexis

  1. A misrepresentation is fraudulent if the maker intends his assertion to induce a party to manifest his assent and the maker
    1. knows or believes that the assertion is not in accord with the facts, or
    2. does not have the confidence that he states or implies in the truth of the assertion, or
    3. knows that he does not have the basis that he states or implies for the assertion.
  2. A misrepresentation is material if it would be likely to induce a reasonable person to manifest his assent, or if the maker knows that it would be likely to induce the recipient to do so.
Restatement Second of Contracts § 163

When a Misrepresentation Prevents Formation of a Contract

View on LexisNexis

If a misrepresentation as to the character or essential terms of a proposed contract induces conduct that appears to be a manifestation of assent by one who neither knows nor has reasonable opportunity to know of the character or essential terms of the proposed contract, his conduct is not effective as a manifestation of assent.

Restatement Second of Contracts § 164

When a Misrepresentation Makes a Contract Voidable

View on LexisNexis

  1. If a party's manifestation of assent is induced by either a fraudulent or a material misrepresentation by the other party upon which the recipient is justified in relying, the contract is voidable by the recipient.
  2. If a party's manifestation of assent is induced by either a fraudulent or a material misrepresentation by one who is not a party to the transaction upon which the recipient is justified in relying, the contract is voidable by the recipient, unless the other party to the transaction in good faith and without reason to know of the misrepresentation either gives value or relies materially on the transaction.
Restatement Second of Contracts § 166

When a Misrepresentation as to a Writing Justifies Reformation

View on LexisNexis

If a party's manifestation of assent is induced by the other party's fraudulent misrepresentation as to the contents or effect of a writing evidencing or embodying in whole or in part an agreement, the court at the request of the recipient may reform the writing to express the terms of the agreement as asserted,

  1. if the recipient was justified in relying on the misrepresentation, and
  2. except to the extent that rights of third parties such as good faith purchasers for value will be unfairly affected.
Restatement Second of Contracts § 167

When a Misrepresentation Is an Inducing Cause

View on LexisNexis

A misrepresentation induces a party's manifestation of assent if it substantially contributes to his decision to manifest his assent.

Restatement Second of Contracts § 168

Reliance on Assertions of Opinion

View on LexisNexis

  1. An assertion is one of opinion if it expresses only a belief, without certainty, as to the existence of a fact or expresses only a judgment as to quality, value, authenticity, or similar matters.
  2. If it is reasonable to do so, the recipient of an assertion of a person's opinion as to facts not disclosed and not otherwise known to the recipient may properly interpret it as an assertion
    1. that the facts known to that person are not incompatible with his opinion, or
    2. that he knows facts sufficient to justify him in forming it.
Restatement Second of Contracts § 169

When Reliance on an Assertion of Opinion Is Not Justified

View on LexisNexis

To the extent that an assertion is one of opinion only, the recipient is not justified in relying on it unless the recipient

  1. stands in such a relation of trust and confidence to the person whose opinion is asserted that the recipient is reasonable in relying on it, or
  2. reasonably believes that, as compared with himself, the person whose opinion is asserted has special skill, judgment or objectivity with respect to the subject matter, or
  3. is for some other special reason particularly susceptible to a misrepresentation of the type involved.
Restatement Second of Contracts § 172

When Fault Makes Reliance Unjustified

View on LexisNexis

A recipient's fault in not knowing or discovering the facts before making the contract does not make his reliance unjustified unless it amounts to a failure to act in good faith and in accordance with reasonable standards of fair dealing.