Question

Sandy Cowden inherited $700,000 from her grandfather. Reginald LaRocco is a local businessman who operates an almond ranch and is an insurance salesperson. He owns several land parcels in the local community and wants to sell some of this land to Sandy. He convinces Sandy to buy Riveracres, Reginald’s ranch on the outskirts of town. Reginald tells Sandy that there are 130 acres on the ranch. In fact there are only 90. Sandy has the ranch surveyed before buying and learns that it has only 90 acres. Reginald tells Sandy that he paid $50,000 for the land 40 years earlier and it is worth 10 times that today. He actually only paid $25,000 for the land which he purchased 53 years ago. He sells it to Sandy for $380,000 and three months later Sandy finds out a similar adjoining parcel sold for $210,000. Sandy wants to get out of the Riveracres contract. Will she be able to do so? Why or why not? Explain.

Answer 1

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The representations of - Reginald LaRocco , we came to know that he is providing false information to Sandy but now find is it fraud or actionable misrepresentation .

Firstly, he said that there were 130 acres on the rench but there were only 90 acres which was also confirmed by Sandy when she visited there.

Secondly , he told lie to Sandy that he had purchased that land 40 years ago in $50000 . But in reality he purchased that 53 years ago for $25000 .

Fraud is the intentional misrepresentation of a material fact with the intent to mislead another and taking another party into contract by misrepresenting facts intentionally.

Innocent misrepresentation occurs when all elements of fraud except wrongful intent are present. The elements of fraud are:

1). false representation of a material fact.

2). known to be false.

3).made with intent to deceive

4). victim is deceived .

5). injury to the deceived party.

To put blame of fraud on Reginald , all the elements of fraud must be present in Reginald communication.

Reginald did misrepresent a material fact by saying there were 130 acres when there were only 90 . However, it is clear to Sandy that the land was 90 acre when she visited there .She knew there were only 90 acres before she purchased. Justifiable reliance is necessary to prove fraud in the inducement.

Reginald's false statements about what he paid and when are not material to the transaction. For fraud to exist, the misrepresentation must not only be of a fact, but of a fact material to the transaction. Reginald states the property was worth 10 times the $50,000 he paid for the property.

Again there must be a misrepresentation of a fact to prove fraud. The belief in the value of property, whether truly held or merely seller's exaggeration, is not a fact. The value of property is a matter of opinion and should be so treated by Sandy. The statement was merely an opinion and it cannot be the basis for fraud.
One element of fraud was missing in each and every talk of Reginald.  If any element is missing then fraud does not exist.

So the conclusion is that Sandy could not get damages as it was not fraud which was done by Reginald. There is no damages for the misstatements and exaggerations of Reginald.