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Fraudulent misrepresentation occurs when a person represents specific facts that are known to the speaker to be false, with the intent to deceive any who hear the representation. Fraudulent misrepresentation is typically raised as a contractual issue but can also be a raised in a tort action as well.
Under the Restatement (Second) of Torts §525, fraudulent misrepresentation is defined as follows:
|“||One who fraudulently makes a misrepresentation of fact, opinion, intention or law for the purpose of inducing another to act or to refrain from action in reliance upon it, is subject to liability to the other in deceit for pecuniary loss caused to him by his justifiable reliance upon the misrepresentation.||”|
The major elements of this offense are 1) a misrepresentation of a material fact, 2) the reliance of the listener which induces either action or inaction, and 3) damages stemming from such reliance.
If a person relies on a fraudulent misrepresentation, and that reliance is justifiable, he may be entitled to recover the pecuniary loss that was suffered from said reliance, and in contract situations, the listener may also be entitled to rescission of the contract.