When What You Got Isn’t What You Bought: Legal issues with seller nondisclosure or misrepresentation – Part 2 of 4

Coeur d’Alene, Idaho, August 3, 2017. In this series, we have been discussing the complexity of real estate purchases. This is part two of the four-part series. Buyers in Idaho need to accomplish their own due diligence and only in one-to four unit residential transactions do Idaho statutes alter the common law that requires the buyer beware. Even so, some sellers may try to outsmart the buyer, and today we address the issue of fraud.

PART 2: Common-Law Claims: Fraud

Although the concept of fraud may seem intuitive, proving fraud in a court of law is difficult. Idaho law provides nine (9) elements of fraud, all of which a plaintiff must prove by clear and convincing evidence. This is a very high standard of proof for a high number of legal claim elements.

These elements are: (1) A party made a statement or misrepresentation of fact; (2) the statement was false; (3) the statement is material to the contract (4) the speaker knew it was false; (5) The speaker intended for the other party to rely on it; (6) the hearer did not know the statement was false; (7) the hearer relied on the statement; (8) the hearer’s reliance was justifiable; and (9) the party was injured as a result. Mannos v. Moss, 143 Idaho 927, 931, 155 P.3d 1166, 1170 (2007); Country Code Development, Inc. v. May, 143 Idaho 595, 600, 150 P.3d 288, 293 (2006).

Therefore, showing that the seller made an inaccurate statement about the property is not enough on its own. A buyer claiming fraud must prove all nine elements above. Among other requirements, the buyer must prove that the seller knew the statement was false when made, and that the seller intended the buyer to rely upon it. Further, the buyer must prove his/her reliance on the seller’s statement was “justifiable.” So, even if a seller knowingly misrepresents something about the house, the buyer may not be able to recover if the court determines the buyer’s reliance was not justifiable. For example, if before closing the buyer had other available information contradicting the seller’s statement, a court might rule the buyer did not justifiably rely on the statement.

As a result, each fraud case is heavily fact-specific. There is no formula to determine whether a court would uphold someone’s fraud claim. Analysis of the facts is required to determine whether the elements of fraud are met.

If a plaintiff can prove fraud, the potential remedies are powerful. As with the PCDA, the court can award actual damages. Further, if a contract is entered into because of one party’s fraud, an Idaho court may order rescission of the contract. See Bolognese v. Forte, 153 Idaho 857, 864, 292 P.3d 248, 255 (2012) (citations omitted). So, if the seller’s misrepresentation is severe enough that the buyer wants to rescind the transaction, proving fraud may allow the buyer to do so. Buyers should keep in mind that Idaho’s statute of limitations period for fraud claims is three (3) years. I.C. § 5-218(4).

In the third blog post in this series, we will look at the second of two common-law claims that may come up if the seller does not disclose information about the property: mistake.

Note: This post is not legal advice, and should not be relied upon as such. Different sets of facts will likely lead to different legal conclusions. If you need assistance with real property matters, call Bristol George, PLLC for a forty-five minute, no charge consultation to see if we can help.

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