Ch. 6.1 PowerPoint - Humble Independent School District by wanghonghx

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          Section 6.1
  Fraud and Misrepresentation
Section 6.1 Fraud and Misrepresentation


        What You’ll Learn

       How to identify the elements of fraud
       (p. 128)

       How to distinguish between fraud and
       concealment (p. 129)



Understanding Business and Personal Law   Genuine Agreement
Section 6.1 Fraud and Misrepresentation


        What You’ll Learn

       How to distinguish between fraud and
       innocent misrepresentation
       (pp. 128 and 132)




Understanding Business and Personal Law   Genuine Agreement
Section 6.1 Fraud and Misrepresentation


        What You’ll Learn

       How to distinguish between the remedy
       available for fraud and the remedy
       available for misrepresentation
       (pp. 128 and 132)




Understanding Business and Personal Law   Genuine Agreement
Section 6.1 Fraud and Misrepresentation


       Why It’s Important

   Learning the elements of fraud may prevent
   you from being victimized or help you claim
   your rights if you are defrauded.




Understanding Business and Personal Law   Genuine Agreement
Section 6.1 Fraud and Misrepresentation


            Legal Terms

       fraud (p. 128)
       rescind (p. 128)
       material fact (p. 129)
       concealment (p. 129)
       misrepresentation (p. 132)



Understanding Business and Personal Law   Genuine Agreement
Section 6.1 Fraud and Misrepresentation


                     Genuine Agreement
          If the offeror makes a valid offer,
          and the offeree has made a valid
          acceptance, then a genuine
          agreement has been reached.
          The courts describe this type of
          agreement as “a meeting of the
          minds.”
Understanding Business and Personal Law   Genuine Agreement
6.1
Section 6.1 Fraud and Misrepresentation

                    Genuine Agreement
 Several circumstances might create a
 defective agreement:

   Fraud
   Misrepresentation
   Mistake
   Duress
   Undue Influence




Understanding Business and Personal Law   Genuine Agreement
Section 6.1 Fraud and Misrepresentation


                 Pre-Learning Question

     How would you define fraud?




Understanding Business and Personal Law   Genuine Agreement
Section 6.1 Fraud and Misrepresentation


                                          Fraud
     Fraud is a deliberate deception
     intended to secure an unfair or
     unlawful gain.




Understanding Business and Personal Law           Genuine Agreement
Section 6.1 Fraud and Misrepresentation


                     Remedies for Fraud
          You may rescind, or cancel, the
          contract.
          You may sue for money damages.




Understanding Business and Personal Law   Genuine Agreement
Section 6.1 Fraud and Misrepresentation


                 The Elements of Fraud
     To succeed in a lawsuit for fraud, the
     following five elements must be
     demonstrated:
     1. A false representation of fact.
     2. Knowledge of the falsity by the
         party making the false
         representation.
Understanding Business and Personal Law   Genuine Agreement
Section 6.1 Fraud and Misrepresentation


                 The Elements of Fraud
     3. Intent to deceive by the party
        making the false representation.
     4. Reasonable reliance by the
        innocent party.
     5. An actual loss must be suffered by
        the innocent party.

Understanding Business and Personal Law   Genuine Agreement
Section 6.1 Fraud and Misrepresentation


         False Representation of Fact
          Fraud requires a false
          representation of a material,
          existing fact.
          A material fact is one that is
          important; it matters to one of the
          parties.

Understanding Business and Personal Law   Genuine Agreement
Section 6.1 Fraud and Misrepresentation


         False Representation of Fact
     Under some circumstances,
     individuals can make false
     representation by choosing not to
     reveal important information.

     This is known as concealment, or
     passive fraud.
Understanding Business and Personal Law   Genuine Agreement
Section 6.1 Fraud and Misrepresentation


 Representation Known to Be False
     To be held accountable for fraud, the
     party making the false representation
     must be aware that it is false. This
     may be shown by:
       Proving actual knowledge
       Showing the statement was made
       recklessly
Understanding Business and Personal Law   Genuine Agreement
Section 6.1 Fraud and Misrepresentation


 Example 1 (page 130)
 Nick purchased a used car from Kyle’s Auto World.
 The salesperson at the lot assured Nick that his car
 had never been involved in an accident. While
 looking through the car’s glove box a week after
 purchasing it, Nick discovered repair receipts that
 indicated the car had been in a major accident.
 Is Nick able to pursue a claim of false
 representation?
 YES HE IS.

Understanding Business and Personal Law     Genuine Agreement
Section 6.1 Fraud and Misrepresentation


              False Representation
           Intended to Be Relied Upon
     To prove fraud, the person making the
     misrepresentation must intend that the
     other party will rely upon the
     information as part of the contract
     negotiations.

Understanding Business and Personal Law   Genuine Agreement
Section 6.1 Fraud and Misrepresentation


  Example 2 (page 131)


  Suppose that Kristen met Nausheen, a woman
  whose car she admired. She asked Nausheen, “Is
  this car a 1964 Mustang?” Nausheen, with no
  intention of selling this car but with knowledge that it
  was really a 1965 model said, “Yes, it IS a 1964.” If
  Kristen then went out and purchased a car like
  Nausheen’s, believing it was really a 1964 Mustang,
  could Kristen win a lawsuit against Nausheen?

Understanding Business and Personal Law         Genuine Agreement
Section 6.1 Fraud and Misrepresentation

 Example 2 (continued)


 Kristen could NOT win a lawsuit against
 Nausheen.

 Nausheen did not make a statement
 with the intent that Kristen rely on it.


Understanding Business and Personal Law   Genuine Agreement
Section 6.1 Fraud and Misrepresentation


                   False Representation
                   Actually Relied Upon
     To prove fraud, the false
     representation must be reasonably
     relied upon by the other party when
     the agreement is made.


Understanding Business and Personal Law   Genuine Agreement
Section 6.1 Fraud and Misrepresentation


  Example 3 (page 131)

  Suppose that Nausheen wants to sell her car and
  tells Kristen that it is a 1964 Mustang. However,
  Kristen is accompanied by Chris, an antique car
  expert. Chris takes Kristen aside and tells her that
  the car is actually a 1965 and is worth far less
  money than a 1964. If Kristen still insisted on
  buying Nausheen’s car at an inflated price, could
  she later win a lawsuit for fraud against Nausheen?

Understanding Business and Personal Law      Genuine Agreement
Section 6.1 Fraud and Misrepresentation


  Example 3 (continues)


  No Kristen cannot win a lawsuit
  against Nausheen for fraud because
  Kristen did not relay on Nausheen’s
  false statement.


Understanding Business and Personal Law   Genuine Agreement
Section 6.1 Fraud and Misrepresentation


                           Resulting Loss
     In proving fraud, the innocent party
     must show some monetary loss.




Understanding Business and Personal Law     Genuine Agreement
Section 6.1 Fraud and Misrepresentation


                 Pre-Learning Question

     How is misrepresentation different
     from fraud?




Understanding Business and Personal Law   Genuine Agreement
Section 6.1 Fraud and Misrepresentation


           Innocent Misrepresentation
     Misrepresentation is the act of
     making an innocent statement that
     turns out to be false, when the person
     honestly believed the statement was
     true at the time it was made.


Understanding Business and Personal Law   Genuine Agreement
Section 6.1 Fraud and Misrepresentation


       Remedy for Misrepresentation
          The right to rescind the contract.
          You may NOT win damages.




Understanding Business and Personal Law   Genuine Agreement
Section 6.1 Fraud and Misrepresentation


  Example 4 (page 132)
  Will bought a mountain bike from Alden, an
  acquaintance at school. Alden said he
  believed the bike did not need any repairs.
  After a weekend ride at a local reservoir, Will
  discovered the back wheel was severely
  misaligned. Will can cancel the deal and ask
  for his money back.
  Is he entitled to sue for damages?

Understanding Business and Personal Law   Genuine Agreement
Section 6.1 Fraud and Misrepresentation


  Example 4 (continued)


  Will cannot sue for damages
  because Alden genuinely believed
  the bike was in good condition.



Understanding Business and Personal Law   Genuine Agreement
Section 6.1 Fraud and Misrepresentation


   • Daily Assignment:
   • Number your paper 1 – 6.
   • Write down answers only.




Understanding Business and Personal Law   Genuine Agreement
Section 6.1 Fraud and Misrepresentation


                                          1

     After Mrs. Grayson died, her neighbor,
     Joel, asked her son, Tom, if he would
     sell her TV. Before giving Tom $100,
     Joel asked, “It works, doesn’t it?” and
     Tom answered, “As far as I know.”
     However, when Joel plugged it in, it
     did not work.
Understanding Business and Personal Law       Genuine Agreement
Section 6.1 Fraud and Misrepresentation


                                          1 - Continued
     Can Joel claim there was false
     representation? Why or why not?

     Write a sentence or two explaining
     your answer.


Understanding Business and Personal Law             Genuine Agreement
Section 6.1 Fraud and Misrepresentation


    Section 6.1 Assessment

     Reviewing What You Learned
     2. A false representation of fact is one
       of the elements of fraud.

     A. TRUE
     B. FALSE

Understanding Business and Personal Law   Genuine Agreement
Section 6.1 Fraud and Misrepresentation


    Section 6.1 Assessment

     Reviewing What You Learned
     3. The deliberate deception intended
       to secure an unlawful gain.

     A. Concealment
     B. Fraud

Understanding Business and Personal Law   Genuine Agreement
Section 6.1 Fraud and Misrepresentation


    Section 6.1 Assessment

     Reviewing What You Learned
     4. Also known as passive fraud or
       nondisclosure.

     A. Concealment
     B. Misrepresentation

Understanding Business and Personal Law   Genuine Agreement
Section 6.1 Fraud and Misrepresentation


    Section 6.1 Assessment

     Reviewing What You Learned
     5. Occurs when a false statement is
       made innocently without intent to
       deceive.
     A. Misrepresentation
     B. Concealment
     C. Oops
Understanding Business and Personal Law   Genuine Agreement
Section 6.1 Fraud and Misrepresentation


    Section 6.1 Assessment

     Critical Thinking Activity
    6. Courts permit fraud to disrupt genuine
       agreement in a contract because fraud
       leads to defective agreement.

    A. TRUE
    B. FALSE

Understanding Business and Personal Law   Genuine Agreement
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       End of Section 6.1
  Fraud and Misrepresentation

								
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