Under Arkansas law, a contract may be voided for fraudulent misrepresentation . Fraudulent misrepresentation involves deliberately misrepresenting goods or services to facilitate a sale, constituting fraud. Arkansas courts treat this as a serious offense because it leads individuals to enter into contracts based upon false information, often causing significant financial loss.
Definition and Legal Requirements
Fraudulent misrepresentation occurs when a false statement is knowingly or recklessly made, leading someone to rely on it, enter into a contract, and suffer losses. To establish a claim, the following elements must be proven under Arkansas law:
False Representation Was Made: The statement contained false, deceptive, or dishonest information.
Knowledge or Recklessness: The person making the statement either:
• Knew it was false,
• Had no belief in its truth, or
• Was reckless about whether it was true or false.
Intent to Induce Reliance: The person intended for the false statement to be relied upon.
Actual Reliance: The false statement was relied on when entering the contract.
Causal Link to Loss: The contract would not have been entered into without the misrepresentation, resulting in financial or other losses.
When substantial evidence is presented, Arkansas Courts generally assume fraudulent statements influenced the claimant to enter into the contract unless strong contrary evidence exists.
Types of Misrepresentation
False statements can be verbal, written, or implied through actions or omissions, occurring in:
• Emails, advertisements, or promotions
• Business discussions or exaggerated claims
Even if initially accurate, failing to disclose changes can also constitute misrepresentation.
Examples of Fraudulent Misrepresentation
• Selling defective goods while claiming they are in good working condition.
• Providing false business financial statements before entering a contract.
Case Law Examples
• Clay v. Brand: The Arkansas Supreme Court ruled that misrepresenting a material fact constitutes actionable fraud. For example, promising to sell hammers but delivering wrenches violates the agreement if hammers were essential to the contract.
• Sellers v. West-Ark Construction Co.: Parol evidence (outside evidence) is usually inadmissible but may be allowed to prove fraudulent inducement in contract disputes.
• Croley v. Baker: The Arkansas Supreme Court set a three-part test for voiding contracts due to fraudulent misrepresentation:
- Knowingly making false representations or failing to verify their truth.
- Intending to induce reliance and secure the contract.
- The deceived party reasonably relied on those misrepresentations.
Legal Remedies
If a contract was entered into due to fraudulent misrepresentation, the court may:
• Rescind the Contract: Cancel the agreement and restore both parties to their original positions.
• Award Damages: Provide compensation for consequential losses, regardless of the defendant’s profit from the fraud.
Legal Protections and Considerations
• Exclusion Clauses and Time Limits: These cannot override fraud claims.
• Mitigating Losses: The claimant must act reasonably to minimize losses after discovering the fraud.
Seeking Legal Advice
If you believe you entered a contract due to fraudulent misrepresentation in Arkansas, seek legal advice promptly. Collect substantial evidence and act quickly to preserve relevant documents.
How We Can Help
At Reeves Law Firm, our experienced attorneys can assist by:
• Reviewing the facts and available evidence
• Identifying necessary documents from the other party
• Assessing the strengths and weaknesses of your case
• Notifying the other party and requesting their response
Contact Reeves Law Firm for a consultation today.
Located in Batesville, Melbourne, and Heber Springs, Arkansas, and serving all of Arkansas, Reeves Law Firm stands ready to handle any civil, estate, family law, guardianship, personal injury, probate, or any other litigation matters that may arise.
Reeves Law Firm primarily serves Independence County (Batesville), Jackson County (Newport), Sharp County (Ash Flat, Highland, Cherokee Village), Lawrence County (Walnut Ridge), Cleburne County (Heber Springs, Greers Ferry, Fairfield Bay), Izard County (Melbourne), Stone County (Mountain View), White County (Searcy), and Baxter County (Mountain Home).
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