Defective Products and Fraud and Misrepresentation Claims in Minnesota
Hamline Law Review, Vol. 29, p. 261, 2006
51 Pages Posted: 5 Oct 2005
Abstract
Products liability claims may be based upon several theories of liability including strict liability for product defect, negligence, breach of warranty and misrepresentation. Claims based upon tortious misrepresentation arise out of a manufacturer's or seller's communication of false information about the product upon which representation the plaintiff has relied to his detriment. The product need not be defective in strict liability terms, nor is it necessary to show the breach of a warranty. The essence of the claim is that the defendant communicated material facts that are false and that this misrepresentation caused the harm to the plaintiff.
Three theories of liability for misrepresentation arise under the common law in Minnesota. Intentional misrepresentation, often called fraud or fraudulent misrepresentation or deceit, is an intentional tort requiring a showing that the defendant knowingly misrepresented the truth. Reckless misrepresentation - confusingly, also sometimes called intentional misrepresentation - occurs when the defendant is conscious that she doesn't know whether her assertions are true or false. And third, negligent misrepresentation may arise when a seller carelessly communicates information that she should know is false.
Contributory negligence is a defense to both reckless and negligent misrepresentation, but is not a defense to intentional misrepresentation where the defendant has knowingly misrepresented the truth.
In Minnesota, damages for misrepresentation are generally measured by the out-of-pocket rule under which the plaintiff may recover only what he has lost, not the benefit of what he was promised. This contrasts with the majority of jurisdictions which measure damages by the benefit-of-the-bargain rule under which the plaintiff recovers the difference between the value of the property received and the value to the plaintiff that the property would have had if the defendant's representation had been true. Where application of this rule would not make the plaintiff whole, the courts have made exceptions to the out-of-pocket rule and applied a different measure of damages.
Several elements are common to all of these claims. For any of them to succeed, the plaintiff must show that the representation was one of fact, not opinion; that the fact represented was false; that the fact represented was material; and that he justifiably relied upon the representation to his detriment.
Various consumer protection statutes may also give rise to a cause of action for damages caused by a misrepresentation. The primary enforcer of these laws is the attorney general, but private parties may also bring actions to implement the statutes' protections. In some cases, no reliance on the defendant's misrepresentations need be shown by the plaintiff in order to proceed under these statutes. It is also possible for a prevailing party to recover attorney's fees and other costs when enforcing these consumer protection statutes.
Keywords: products liability, fraud, misrepresentation, negligence, out-of-pocket, benefit-of-the-bargain
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