2. Find information using the Internet resources and comment on the case which constitutes both a crime and a tort. Text 2

1. Read the text and choose the best answer to each question.

Fraud

Fraud is an intentional deception or a dishonest scheme used to take deliberate and unfair advantage of another person. Courts have distinguished two types of fraud: actual (фактический) fraud and constructive (подразумеваемый) fraud.

Actual fraud is intentional criminal deception for the purpose of inducing another to part with something of value, to acquire something of less than apparent value, or to surrender a legal right. Schemes specifically intended to cheat someone, such as selling shares in nonexistent plots of land, are actual frauds. Constructive frauds are words, acts, or omissions that tend to mislead or deceive someone or violate a confidence but that are not necessarily of malicious intent. Selling a house while for­getting to mention a permanently malfunctioning heating sys­tem is an example of constructive fraud.

When fraud occurs in a contractual setting, the victim has the option to sue for damages or cancel the contract. The effects of fraud and misrepresentation on commercial transactions are discussed in connection with the law of contracts. Here fraud is examined as a tort giving rise to damages for personal or eco­nomic harm. Usually, the victim of fraud may sue the wrongdo­er and recover the amount of damages caused by the fraud. To recover in an action for the tort of fraud, sometimes called deceit, the plaintiff must prove the following elements:

· a false representation of material fact;

· knowledge that the representation was false;

· intent to induce another to act;

· justifiable reliance on the representation;

· injury resulting from such reliance.

The first three elements focus on the defrauder, the last two on the victim.

The essence of fraud is deceit by one person which generally takes the form of a misrepresentation of fact. A person can mis­represent facts by oral or written statements or by conduct. For example, turning back the odometer of a car is a misrepresenta­tion by conduct.

For an act to constitute fraud there must be a misrepresen­tation of a material fact. A fact is something that exists now or in the past; material facts are those that would affect the per­son's decision in a particular transaction. For example, a state­ment by the seller of a retail store concerning the profits of the business is a representation of past or present facts which would be material to a buyer's decision to purchase the business. To establish fraud, the plaintiff must prove that the defrauder made a statement knowing that it was false or not believing that it was true and intended to induce another to act upon it.

Fraud does not generally include a false statement of opin­ion, of value, or of law. Sellers of goods often make a statement such as «This is the best television on the market» or «My house is worth $100,000». The law treats such statements as the seller's opinion only, not a statement of fact. Future expec­tations are also not considered statements of fact. Thus, a pre­diction - such as «This business will be profitable» - is not a statement of fact.

However, a person may be held liable for misstatements of opinion, value, or law where it is reasonable for the other party to rely on the statements. One such situation is where one of the parties is an expert or claims to have special knowledge or com­petence in a particular field. Thus, the opinion of a real estate broker as to the value of land or the opinion of an attorney upon a point of law will be considered a statement of fact.

Fraud can also take the form of a concealment of material facts. Concealment occurs when a person takes active steps to hide information or facts from the other party. This is to be con­trasted with the failure to volunteer information to the other party. Historically, silence, or a failure to disclose facts of which one has knowledge, was not considered fraudulent. In negotiat­ing a contract, the law did not generally require one party to fully disclose information to the other party. Today, however, a growing number of exceptions to this general rule reflect increasing concern for the consumer's right to full and accurate information and for ethical behavior in the marketplace. Under certain circumstances a duty of disclosure is imposed in sales transactions where one party has knowledge of latent or hidden defects in the property for sale. For example, suppose that in a real estate transaction the seller's house has a major structural defect in the foundation and the seller knows about it. If the buyer is not aware of the condition because it is not visible or apparent during his or her inspection of the house, the seller would commit fraud if the house is sold without disclosing this condition to the buyer. However, a party is not required to dis­close facts that are obvious or that could be discovered by rea­sonable inspection.

To recover damages the defrauded party must establish that his or her reliance on the misrepresentations of the defendant caused personal harm or economic losses. In the typical fraud case the plaintiff has been induced to purchase property or serv­ices. Because of the misrepresentations, the property or servic­es are not worth the goods, money, or services exchanged for them, resulting in economic loss to the plaintiff. The plaintiff can recover damages, called direct damages, for this economic loss. In appropriate cases the plaintiff may also be entitled to special damages - indirect losses caused by the fraud that are foreseeable, such as the cost of renting a car when a defective automobile breaks down. Punitive damages are also recoverable when the fraud is willful, malicious, or particularly oppressive.

Choose the best answer to each question:

1. Fraud is an intentional deception aimed at ...

a) undermining a person's reputation in the opinion of right-thinking members of the society.

b) direct interference with the use or enjoyment of some­one's legal rights.

c) making use of another person in an unfair, dishonest way.

d) taking another person's property. money, etc. and using it as if it were one's own.

2. When the fact of fraud is stated, the victim may bring a suit against the wrongdoer ...

a) to make the fact known to public.

b) to recover damages caused by the fraud.

c) to prevent the other party from learning important facts.

d) to avoid the effects of fraud.

3. Among the elements which the plaintiff must prove to recover damages the text doesn't mention ...

a) misrepresentation of a material fact.

b) understanding that the representation was deceitful.

c) reasonable reliance on the facts presented.

d) infringement of his/her natural rights.

4. Concealment of material facts implies ...

a) the failure to inform the other party about some facts.

b) taking measures to prevent information from being known to other people.

c) showing increasing concern for the other party's rights.

d) failure to carry out the duty of disclosure.

5. To prove that the defrauded party suffered losses, he/she must ...

a) hold the other party liable for misrepresentation.

b) have specific knowledge or competence in a particular field.

c) negotiate the matter with the other party.

d) establish the fact of full reliance on the misrepresentation which led to personal harm and economic losses.

2. Read the following case of a fraud claim, Green v. Geer, in connection with the concealment of a latent defect in the house put up for sale. Using the given information, decide what might be the grounds for the appeal and who should win the lawsuit.

Ernest and Phyllis Green purchased the house of Paul and Susan Doleshals. Don Geer was the real estate agent for the Doleshals in the sale. Prior to the sale, the Greens advised John Barnes, a salesman for Geer, they would not buy a house unless it had a dry basement. When they viewed the Doleshal house, there was a puddle of water in the basement. The Doleshals and Barnes represented to the Greens that the water problem was caused by settling of the basement window wells and advised them that the problem could be solved by terracing the yard so the water would drain away from the windows. A clause was inserted in the real estate contract that called for the terracing of the front yard by the Doleshals.

Within a few days of the Greens' moving into the house, the basement water problems reappeared in spite of the reterracing of the lawn. The water came from the seam between the floor wall and from a crack in the floor.

The Greens sued the Doleshals and Geer for fraud. Evidence presented at trial established a major problem with water leak­ing into the Greens' basement; moreover, the Doleshals knew the problem was not simply leaking window wells, yet they failed to reveal the gravity of the problem to their agent or to the Greens. The trial court found for the Greens and awarded them judgment in the amount of $4,835 for basement repair and loss of goods. The Doleshals and Geer appealed.

Text 3

Read the text and decide whether the statements below are true (T) or false (F). Give reasons for your deci­sions.