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Week 6 - Week 6 Lecture 1 I Misrepresentation and Fraud A...

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Week 6 Lecture 1 I. Misrepresentation and Fraud : A. Concealment or Non-Disclosure 1. One Party tells only part of the truth, but deliberately omits part of the relevant facts in order to create a misleading impression. 2. A positive action is taken to conceal truth (may be nonverbal action, such as moving things in your basement in order to cover up the evidence of pervious water damage). 3. The innocent party must prove that the person knew that the information was material by showing that a reasonable person would consider it material to the contract. 4. Condition created by seller and hard to discover by prudent buyer. 5. If the seller has a fiduciary duty towards the buyer to reveal any defects on the basis that the seller represents a special person of trust. Lawyer/ client relationships and doctor/ patient relationships are some of the relationships that are covered by the fiduciary duty. 6. Stambovsky v. Ackley Two parties have a contract for the sale of a house. After the buyer purchases the house, they discover that the house is allegedly haunted. This issue is whether the seller concealed the alleged haunting. The court in this case ruled that the defect in the house was not obvious to a prudent and careful buyer. Further, the seller had gone to great lengths to make sure that the buyer did not know of the alleged haunting. Therefore the alleged “haunting” was material in that it would affect the potential value of the house. a. N.Y. Real Prop. L. sec 443-a this statute imposes disclosure obligations on the sellers of real estate. It also says that certain information is presumed not relevant and cannot be material for purposes of the contract i. That any occupant was infected with HIV or AIDS. ii. That a murder, suicide, death, or crime was committed or took place on the property. iii. The obligation is on the buyer if they want any information disclosed, and they must inform of their intent in writing. If a buyer asks about any of these things, the seller then has the duty to disclose. iv. If seller fails to disclose when required to, buyer can avoid contract and/or recover damages/ receive the difference between the purchase price and newly determined fair
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market value. Privacy issues may arise when dealing with disclosure. II. Defective Assent- fraud A. Requirements to Prove Fraud i. Material Misrepresentation of fact . 1. The fact must be crucial to the performance of the contract. 2. It must be a fact. Cannot be statements of opinion of predictions of future value, etc. 3. There are a few important exceptions a. When the fraudster deliberately misstates his own intentions about future conduct. Difficult to Prove . If they never had a present intention to do what they stated, it would be a misrepresentation of fact.
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