Fraudulent/Intentional Misrepresentation Claims in California

“Fraudulent misrepresentation” refers to a statement, which can be verbal, written, or implied through actions, that is made recklessly and without concern for its truthfulness; or a false promise that is made without any intention of actually carrying out the promised action.

To bring a successful claim of fraudulent or intentional misrepresentation in California, a plaintiff would have to prove the following:

1. the defendant represented to another that a fact was true;
2. the representation was actually false;
3. the defendant knew the representation was false (or was reckless about its truth);
4. the defendant intended the other person to rely on the statement;
5. the other person did rely on the statement;
6. the other person was harmed by the reliance; or
7. the plaintiff’s reliance on the defendant’s representation was a substantial factor in causing the harm suffered.

Different Types of Misrepresentation Claims

California’s Civil Code section 1710 identifies four kinds of fraud:

1. intentional misrepresentation;
2. concealment;
3. false promise; and
4. negligent misrepresentation.

This article primarily discusses cases where the misrepresentations were intentionally or fraudulently made.

Our California personal injury attorneys discuss the following frequently asked questions about fraudulent or intentional misrepresentation cases:

• 1. What is fraudulent misrepresentation?
• 2. How can a person express a false statement?
• 3. Can an opinion be considered fraudulent?
• 4. What is concealment?
• 5. What about false promises?
• 6. What is a negligent misrepresentation?
• 7. What does “reliance” mean?

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Fraudulent misrepresentation claims are common in breach of contract cases. Rescission is the most common remedy.

1. What is fraudulent misrepresentation?

Fraudulent or intentional misrepresentation claims in California occur when a defendant represents to another that a fact was true and:

• the representation was actually false about a material fact;
• the defendant knew the representation was false or was reckless about its truth (“knowledge of falsity”);
• the defendant intended the other person to rely on the statement (“scienter”);
• the other person did rely on the statement (“justifiable reliance”);
• the other person was harmed by the reliance; and
• the other person’s reliance on the defendant’s representation was a substantial factor in causing the harm suffered (“causation”). 1

What is a misrepresentation?

A misrepresentation of fact is a false representation. A representation is:

• a statement made from one person to another that a certain fact is true or accurate.

When that representation is false information, it is a misrepresentation.

A statement is false when it is stated with “deceit.” Under California law, “deceit” is defined as:

• the suggestion as a fact of that which is not true by one who does notbelieve it to be true. 2

In other words, deceit is intentional fraud – a lie. When a person lies to another in order to get him or her to do something and that person relies on the lie and is hurt by it, a claim for fraudulent or intentional misrepresentation may be appropriate.

2. How can a person express a false statement?

Intentional misrepresentation is a statement that can be made:

• orally (spoken);
• in writing; or
• implied by a person’s conduct or behavior.

How the statement is made is less important than the content of the statement and its accuracy.

What if the false statement is made accidentally?

For purposes of intentional or fraudulent misrepresentation, statements must be made by the defendant when:

• he or she knew the statement was false at the time the statement was made in order to convince another person to rely on the false statement. 3

The misrepresentation must be made:

• willfully,
• purposely, and
• with intent to deceive.

Who decides if the statement was accidentally or intentionally false?

If a jury tries the case, the jury will decide whether the statement was false through a purposeful statement or a good-faith, innocent misrepresentation. 4

3. Can an opinion be considered a fraudulent?

Generally speaking, an opinion cannot be a statement upon which a lawsuit can be based under this California law. A person’s expression of his or her opinion does not usually constitute a misrepresentation even when it turns out that opinion is incorrect.

This happens frequently in the “sales talk” situation where a salesman or saleswoman expresses his or her opinion on a particular product, such as a car. The opinions of the salesperson usually do not constitute representations. 5

Example: Carol is a car saleswoman at a local car dealership. She is talking with James about purchasing a new SUV he has expressed some interest in. James asks her if the car is a “good one.” Carol says “I think these are really great cars. They’re reliable and fun to drive. I know you’ll like it if this is the one you pick.”

James buys the car and immediately has problems with it. He sues Carol for misrepresenting the car. The statements she made are most likely opinion (or “mere puffery”) and are therefore protected. Unless Carol knew the car to be in poor condition (which would be actionable fraud), her statements are merely opinion and do not meet the elements of fraudulent misrepresentation.

4. What is concealment?

Concealment of a fact or facts can also constitute fraud. Concealment occurs when a person:

• intentionally fails to disclose or actively hides a known fact in order to induce reliance on the false representation.

For concealment cases, there must be a legal duty to disclose the fact to the plaintiff but instead, the defendant intentionally suppressed the fact (“nondisclosure”) with the intent to defraud. 6

Example: Billy and Daniel are selling their home. They hire Allison as their real estate agent. They fill out a home defect disclosure form and list that the basement leaks sometimes when the rain is extremely heavy. Allison is showing the house to a potential buyer, Fred. Despite having a fiduciary duty to Fred, Allison altered the disclosure form to hide the fact that the basement sometimes leaks in order to create inducement for Fred to buy the home. When the basement floods, Fred files a lawsuit against Allison for concealment and false misrepresentation.

5. What about false promises?

A false promise is sometimes called “promissory fraud” in legal circles. A person commits a false promise when:

• he or she makes a promise to do something (“intention of performing”) without any actual intent to perform what was promised. 7

The promise must be made in order to convince the other person to rely on the promise while the individual who made the promise knew he or she never meant to keep his or her word.

This is a statement not that something is true right now but that something will occur in the future.

6. What is a negligent misrepresentation?

A negligent or “accidental” misrepresentation occurs when:

• a person makes a statement that an important fact is true even when he or she honestly believes it to be true, but the statement does not have a reasonable basis for the belief; and
• the said person intended another person to rely on the said statement; and
• the other person relies on the statement to his or her detriment. 8

There has to be a positive or express statement of a fact, not just an implied one. A statement made negligently is considered less serious than one done intentionally but can nonetheless result in a lawsuit for compensatory damages.

7. What does “reliance” mean?

A person relied on another person’s statement if:

• the false statement, concealment, or false promise substantially influenced him or her to act in a certain way; and
• he or she would probably have not done so without the false statement, concealment, or false promise. 9

Reliance requires that the victim show he or she would not have “gone along with it” except for the defendant’s conduct of lying and false statement of facts.

However, the false statement does not have to be the only reason for the reliance. If multiple true statements were made and an important false one (“half-truth”), it is permissible for a person to rely on both the true statements and the false statements in making a decision to rely upon. 10

Legal References:

1. Judicial Council of California Civil Jury Instructions. CACI No. 1900 Intentional Misrepresentation. See alsoEngalla v. Permanente Medical Group, Inc. (California Supreme Court, 1997) 15 Cal.4th 951, 974; see also Lazar v. Superior Court (1996) 12 Cal. 4th 631. See also Restatement (Second) of Torts § 531-533.
2. California Civil Code 1710.
3. California Civ. Code 1709.
4. Beckwith v. Dahl (2012) 205 Cal.App.4th 1039, 1061.
5. See Hauter v. Zogarts (1975) 14 Cal.3d 104, 112. See S&S Construction Co. v. Cohen (1983) 151 Cal.App.3d 941, 946.
6. See, e.g. La Jolla Village Homeowners Assn. v. Superior Court (1989) 212 Cal. App. 3d 1131, 1151. See also Judicial Council of California Civil Jury Instructions. CACI No. 1901 Concealment.
7. Judicial Council of California Civil Jury Instructions. CACI No. 1902 False Promise (Under Civil Code section 1709, one is liable for fraudulent deceit if he ‘deceives another with intent to induce him to alter his position to his injury or risk ….’). See also Yellow Creek Logging Corp. v. Dare (1963) 216 Cal.App.2d 50.
8. See Diediker v. Peelle Financial Corp. (1997) 60 Cal. App. 4th 288, 297.
9. Judicial Council of California Civil Jury Instructions. CACI No. 1907 Reliance.
10. Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 170 (In establishing the reliance element of a cause of action for fraud, it is settled that the alleged fraud need not be the sole cause of a party’s reliance. Instead, reliance may be established on the basis of circumstantial evidence showing the alleged fraudulent misrepresentation or concealment substantially influenced the party’s choice, even though other influences may have operated as well.”)