Question

research one (1) publicly traded company in which you are interested Locate the company website and financial statements. Also locate information on the types of bonds the company issues. Review the Liabilities section of the company’s Balance Sheet.

a)Imagine that you just read about another company in the same industry facing criminal charges for misrepresenting their liabilities. Naturally, you’re worried that the company you’re researching might be doing something similar. Hypothesize a scenario in which someone at the company could intentionally misstate liabilities for his or her personal financial gain. Recommend two (2) actions that these companies can take to prevent or detect intentional misstatements of liabilities for personal financial gain. Justify your response.

b)Imagine that you are advising an investor who is considering purchasing bonds issued by the selected company. Analyze the types of bonds the chosen company issues. Make a recommendation to the investor as to which type of bond would provide the most value. Justify your response.

Answer 1

A contract is not considered valid unless all parties are in agreement to the terms. If the expressed terms are not accurate, then any agreement is based on a false premise and the contract is invalid. Knowingly making false statements -- whether in writing, verbally, through a simple gesture, or even silence -- constitutes false misrepresentation if it has a material effect on the deal.

The Elements of Fraudulent Misrepresentation

In order to prevail in a lawsuit for fraudulent misrepresentation, the plaintiff must be able to prove the following six elements:

1. A representation was made (in contract law, a representation is any action or conduct that can be turned into a statement of fact).
2. The representation was false.
3. The representation, when made, was either known to be false or made recklessly without knowledge of its truth.
4. The representation was made with the intention that the other party rely on it.
5. The other party did, in fact, rely on the representation.
6. The other party suffered damages as a result of relying on the representation.

There are three types of misrepresentation and the first one is Fraudulent Misrepresentation. This kind of misrepresentation occurs when one makes representation with intent to deceive and with the knowledge, which is it false. An action for fraudulent misrepresentation allows for a remedy of damages and rescission. One also can sue for the fraudulent misrepresentation is capable of being making recklessly. Negligent also of the type in misrepresentation that is occurs when the defendant carelessly makes a representation while having no reasonable basic to believe it to be true. This type of misrepresentation is relatively new and was introduces to allow damages in situation where neither a collateral contract nor fraud is found. Besides that, innocent misrepresentation also including in this kind of misrepresentation and it occurs when they represent or had reasonable grounds for believing that his or her false statement was true Prior to Hedley Byrne, all misrepresentations that were not fraudulent were considered to be innocent. This type of representation primarily allows for a remedy of rescission, the purpose of which is the parties back into a position as if the contract had never taken place. Section 2 “Misrepresentation Act 1967" however, allows damages to be award in lieu of rescission if the court deems it equitable to do so. This judged on both the nature of the innocent misrepresentation and the losses suffered by the claimant from it.