In an earlier post we raised the subject of business torts, which reflect the possibility that like an individual, a legal entity such as a business can engage in wrongful conduct that is actionable in court in Ohio. We began our examination of business torts with intentional interference with business relationships. In this installment, we will consider another legal theory under which a business can find itself the defendant in a civil lawsuit: misrepresentation.
Misrepresentation can harm another person or business if it causes that person or business to act, or to refrain from acting, in such a way that economic or other loss results. Misrepresentation may be either intentional or negligent, with intentional misrepresentation being the more serious tort.
To prevail in court in an intentional misrepresentation cause of action, the plaintiff must establish that it was more likely than not that the following elements took place:
- First, the defendant made a material representation of fact to the plaintiff;
- Second, the defendant knew at the time he made the representation that it was false;
- Third, the defendant meant for the plaintiff to rely on the false statement;
- Fourth, the plaintiff did in fact so rely on it, and the reliance was justifiable; and
- Fifth, that in relying on the false statement, the plaintiff suffered injury or loss.
What constitutes a “material” representation is a question for the jury to decide in a lawsuit, but generally speaking it means that the false statement of fact was one that would influence a reasonable person to act or refrain from acting. In addition to someone intentionally making a misrepresentation about a past or present fact or intention, it is also possible for someone to be accused of misrepresentation if he lacked the authority to make the claim, or fraudulently concealed facts that he had an obligation to disclose to the other party. These can include but are not limited to fiduciary relationships, disclosures concerning real property that the defendant is aware of and which the plaintiff cannot readily discover, or knowingly making false statements that were not meant to be relied upon by the plaintiff but actually were relied upon.
This post only introduces the business tort of misrepresentation. In future posts we will address more on the subject, including negligent misrepresentation and some common defenses to misrepresentation claims that can take place in a business litigation setting.