Research Paper on "Under Arkansas Law Did a Fraud Occur"

Research Paper 7 pages (2083 words) Sources: 7

[EXCERPT] . . . .

Arkansas Fraud Case

Schnur, Tarpley & Taylor, P.A.

PRIVILEGED ATTORNEY WORK PRODUCT

Lindsay Tarpley, Partner

Associate

Howard v. Chastain, File # 2010-325

Under the Arkansas law does a seller commit fraudulent inducement when that seller represents that she is selling an authentic item, in response to a solicitation specifically seeking to purchase said authentic item, and the item turns out to be a fake/reproduction?

Tim Howard will likely have a viable claim for against Chastain, however, he will have difficulty in proving two elements, Chastains knowledge of that she made a false statement and whether his reliance on Chastain's representation was justifiable in light of his failure to use due diligence prior to finalizing the sale.

Statement of relevant facts

Our potential client, Mr. Tim Howard (hereafter "Client"), won 10.6 million dollars in the Mega Millions lottery. He decided to use some part of the money to celebrate his wedding anniversary, including giving his wife an Akers silver lady watch. Akers Silver Lady watches are luxury watches known to be difficult to obtain, especially through authorized dealers, due to the small number of watches produced in this line (only 5000 Akers Silver Lady watches were made by Beckham).

Client resorted to posting a 'watch wanted' message for an original mint condition Akers Lady Silver on the forum web page Watch Enthusiasts (www.watchenthusiasts.com). The forum has no known connection with or authorization from Beckham or its authorized dealers. Individuals simply use this forum to display their watches and hence it acts as a place where information on watches is exchanged as a center where individuals post queries for intended purchase or sale of particular watches.

After Client posted a message on Watch Enthusiasts that he was looking to purchase a mint condition Akers Silver Lady watch, he received a reply from Ms. Brandi Chastain (hereafter "Seller") who claimed to have such a watch. Seller attached a picture of the watch in a letter to Client allegedly representing the Akers Silver Lady watch she was willing to sell to Client. Client noticed that the picture does not show the back of the watch where engravings of mark of authenticity are supposedly located. Client and Seller are unable to meet prior to the Client's wedding anniversary so that Client could inspect the watch for prior to sale. However, due to Client's urgency to present the watch to his wife on their anniversary, Client completes the transaction without confirming that the watch is a genuine Akers silver lady brand. Client pays Seller via PayPal and Seller mails the wathc to Client via U.S. Insured Mail.

Client gave the watch to his wife on a cruise to Europe. His wife takes it to Maradona jewelers, a specialist shop, when they return from a cruise. Maradona determines that the watch is a fake Beckham watch valued at $100, far below the $12,500 purchase price. Client, understandably feels that he has been 'duped' and has sought the counsel of our firm.

Additional potentially important facts to note are that Seller claims to have worked with a watch company and that she was given the watch by her grandfather as birthday/graduation gift. Therefore, the questions of Seller's actual knowledge that the watch was fake and whether she had a duty to confirm its authenticity (since the buyer was her grandfather) are relevant for purposed of this analysis.

Discussion

Thesis/Introduction

Client appears to have a valid claim for fraud against Seller, provided he can establish that Seller knew the watch was not authentic and that he would not have detected the watch was not real by using due diligence. While legal definitions will vary in different jurisdictions, an action for fraud will generally be found where one intentionally deceives another with the intent for personal gain or to cause damage to another individual. Evidence of intent to deceive or mislead is the essential requirement for finding fraud and such evidence can include manipulation of documents and facts and the failure to communicate information. In the matter of Tim Howard (Client) and Brandi Chastain (Seller), this memo will identify and explain the elements of fraud, the likelihood of Client succeeding in such a claim and the obstacles to be overcome in order for him to prevail.

Rule

Based on current Arkansas law, the tort of fraud is based on five elements, all of which must be present for a plaintiff to prevail in a civil suit. Each of the five traditional elements of fraud must be established by evidence with unique particularity and not equally consistent with either honesty or deceit (37 Am. Jur. 2d Fraud and Deceit §23 and Fausett & Co., Inc. v.

Bullard et. ux., 217 Ark. 176, 229 S.W.2d 490). The elements are 1) a false representation; in reference to a material fact; 2) made with knowledge of its falsity or with insufficient evidence upon which to make the representation;; 3) with the intent to induce action in reliance upon the representation; 4) and on which an action is taken in justifiable reliance upon the representation; and 5) where damages are suffered as a result (Ibid).

Explanation

To prove the first element of fraud (false representation; in reference to a material fact); a plaintiff must prove the falsity and materiality of a fact asserted by the defendant (Fausett & Co., Inc. v. Bullard et. ux., Supra). In general, a false statement will be considered as "material" if it has the natural tendency to influence, or is capable of influencing, the decision of the decision-making body to which it was addressed (37 Am. Jur. 2d, Fraud and Deceit §236). A withheld fact will likewise be "material" if the plaintiff would have acted differently had he or she been aware of it (Ibid.)

The question of whether the defendant had knowledge of the falsity of the statement (the second element of fraud) is strictly a factual question to be determined by the trier of fact (Medlock v. Burden, 321 Ark. 269, 900 S.W. 2nd 552 (Ark. 1995). Questions of credibility as to parties and witnesses and the weight attributed to inferences made regarding the knowledge of a party are part of the factual question and also determined by the trier of fact Wheeler Motor Co., v. Roth, 315 Ark. 318, 867 S.W. 446 (Ark. 1993). The courts have held that knowledge can be determined from the entirety of the circumstances, including character evidence and circumstantial evidence.

Whether a defendant has the intent to deceive is also a question of fact. Failing to speak or disclose known facts will also be construed as an intentional misrepresentation or fraudulent concealment and "amounts to fraud just as much as an affirmative falsehood" ( Floyd v. Koenig, 274 S.W.3d 339 (2008)). Thus, intent can be established by an affirmative false statement, as well as by concealing a facts that would prevent a buyer from consummating a transaction.

The fourth element requires that reliance on the misrepresentation be justifiable. The courts have taken a more limited view of this element. For instance, according to the Arkansas Supreme Court, if a plaintiff might have detected the fraud by the exercise of reasonable diligence, he is presumed to have had reasonable knowledge of it (Delanno, Inc. v. Peace, 366 Ark. 542, 237 S.W.3d 81 (2006)). However, it was held in Myers v. Martin (168 Ark. 1028, 272 S.W. 856 (Ark. 1925)), that the buyer may credit the statements of a seller who has peculiar knowledge of the subject matter of the sale. Therefore, while the buyer has some responsibility to prevent a fraud, he is not expected to investigate every statement of a seller who has specific knowledge regarding the sale.

To prove damages, the plaintiff must show the false statement was made with intent to have the other party act upon them to his injury, and such must be their effect (Jarratt v. Langston et al., 99 Ark. 438, 138 S.W. 1003 (Ark. 1911)). In most cases, monetary damages will be in the form of a buyer spending money for an item he did not receive or not receiving full value in return for a purchase price.

Application

In order for Client to prevail on a claim for fraud against Seller, Client will have to present clear and cogent evidence that all five of the elements have been met. Client will likely easily succeed in establishing the first, third and fifth element and struggle to establish elements two and four.

The first element, a false representation involving a material fact, is obviously present. Client solicited the sale of a genuine Akers Silver Lady watch and Seller, in her initial correspondence, clearly identifies that she has an "Akers Silver Lady" in very good condition that she is willing to sell for $12,500.00. While the words "real," "authentic" or "genuine" were not used by either party, it is reasonable to assume that the finder of fact will conclude that the silence as this term implies authenticity given the price of the sale and the subject matter… READ MORE

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