Businesses seek competitive advantages in their interactions with one another. Unfortunately, this sometimes involves intentional misrepresentations of fact that cause harm to the other party. If the misrepresentation of fact is material and relied upon to the detriment of the other party, it may serve as a basis for a fraudulent misrepresentation claim.
Fraudulent misrepresentation claims are often complicated and can be difficult to prove. To be successful, the party bringing the action must prove all of the following elements:
- A representation of fact - there must be a representation of an existing fact - expressions of opinions and puffing statements are not actionable;
- The representation was false;
- The representation was material;
- The speaker knew of the falsity of the representation or was ignorant of its truth;
- The speaker intended that the representation be acted on;
- The party to whom the representation was made did not know of the falsity of the representation;
- The party to whom representation was made relied on the truth of representation;
- The party to whom representation was made had a right to rely on the representation; and
- Reliance on the misrepresentation caused damages.
Under certain circumstances, conduct alone may constitute a representation actionable as fraud. Also, silence or the failure to disclose a material fact may be actionable under certain circumstances - if a fiduciary or confidential relationship exists or where one party has superior knowledge of a material fact that is not within the reasonable reach of the other party. Representations of future performance are not actionable as fraud unless they are coupled with proof of intent not to perform as represented at the time the representation was made.
Damages recoverable in a fraud case included actual economic losses and, under certain circumstances, punitive damages. Economic losses that are speculative and cannot be proven with reasonable certainty are not recoverable. Punitive damages are recoverable only when there is clear and convincing proof that the defendant's conduct was outrageous because of defendant's evil motive or reckless indifference to the rights of others. If proven, the jury may award such sum as it believes will serve to punish defendant and deter defendant and others from like conduct. There are both state statutory limits and federal constitutional limits on the amount of punitive damages that can be awarded.