Abstract

http://ssrn.com/abstract=957590
 
 

Footnotes (101)



 


 



The Place of Reliance in Fraud


John C. P. Goldberg


Harvard Law School

Anthony J. Sebok


Yeshiva University - Benjamin N. Cardozo School of Law

Benjamin C. Zipursky


Fordham University School of Law


Arizona Law Review, Vol. 48, p. 1001, 2006
Vanderbilt Public Law Research Paper No. 07-02

Abstract:     
To prevail on a claim of common law fraud, the plaintiff must prove reliance on the defendant's misrepresentation. This requirement is puzzling, given that, under many modern formulations of the tort, the plaintiff must also prove that the misrepresentation was a factual and proximate cause of the plaintiff's detriment. One standard view of reliance emphasizes its role as the mechanism by which defendant's misrepresentation generates harm to the plaintiff. But, cast as such, it seems redundant with factual causation. Another way reliance is understood is as setting a practical limit on the amount of liability that a misrepresentation can generate. So regarded, it seems redundant with proximate cause.

In this Article, we explain why reliance forms a distinct element of fraud. Conceptually, we argue, the wrong of fraud is not an interference with the victim's interest in avoiding certain types of harm, such as economic loss, but instead an interference with her interest in being able to make certain kinds of decisions free of misinformation generated by others. Thus, a knowing misrepresentation that foreseeably causes harm to another does not defraud that other unless and until she is induced by that misrepresentation to make a decision she would not have otherwise made. Structurally, we argue that the requirement of reliance is linked to a more general feature of tort law, namely, the relational structure of tort duties. To commit a tort is to breach a duty that is owed by an actor to a class of potential victims. Therefore, to prevail, a tort plaintiff must establish not merely that wrongful conduct has caused harm to her, but that the conduct was wrongful as to a person in her position. When it comes to fraud, plaintiff's reliance is essential to establishing that the defendant's conduct was wrongful as to her, and hence to establishing her right to recover.

Having explained the place of reliance within fraud, we next explain why reliance need not be central to other wrongs that bear some resemblance to fraud, including, for example, private enforcement actions brought under consumer protection statutes. Likewise, we demonstrate that some claimants who have been injured by misrepresentations without relying on them will have valid claims for other torts, such as negligence and tortious interference with contract. The take-away point is this: An understanding of why reliance functions (or doesn't function) as a component of a legal wrong that involves misrepresentation must be sensitive to the institutional source of the legal prohibition that defines the wrong and, relatedly, the interests that are meant to be served by that prohibition.

Number of Pages in PDF File: 27

Keywords: consumer protection, deceit, duty, fraud, misrepresentation, private rights of action, proximate cause, relational duty, reliance, securities fraud, tortious interference

Accepted Paper Series


Download This Paper

Date posted: January 17, 2007  

Suggested Citation

Goldberg, John C. P. and Sebok, Anthony J. and Zipursky, Benjamin C., The Place of Reliance in Fraud. Arizona Law Review, Vol. 48, p. 1001, 2006; Vanderbilt Public Law Research Paper No. 07-02. Available at SSRN: http://ssrn.com/abstract=957590

Contact Information

John C. P. Goldberg (Contact Author)
Harvard Law School ( email )
Areeda 232
1545 Massachusetts Ave
Cambridge, MA 02138
United States
617-496-2086 (Phone)
Anthony J. Sebok
Yeshiva University - Benjamin N. Cardozo School of Law ( email )
55 Fifth Ave.
New York, NY 10003
United States

Benjamin C. Zipursky
Fordham University School of Law ( email )
140 West 62nd Street
New York, NY 10023
United States
Feedback to SSRN


Paper statistics
Abstract Views: 2,914
Downloads: 422
Download Rank: 37,954
Footnotes:  101

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo7 in 0.297 seconds