Meeting the Michigan Criteria for Fraud and Misrepresentation
Fraud in Michigan, and in most states, is defined as a specific representation of fact meeting all of the following criteria:
- The statement is known to be false by the person or company making the statement. It is important that the representation being relied on as fact is not an expression of opinion or a promise to do something in the future. For example, a car salesman saying a vehicle is the best car on the market is puffery – an expression of opinion or praise that cannot be reasonably relied on. However, if a salesman says only 400 of the vehicles were made and it is valuable, but it turns out there were thousands of this car made, this may indeed qualify as fraudulent representation. A promise to do something in the future usually doesn’t qualify as a representation of fact, unless it can be shown that the person never intended to keep the promise. Thus, a statement that, “If you lend me $100, I will pay you back in a week” cannot be considered fraud unless it can be shown that the person making the promise knew they had no way of paying the money back and never intended to do so.
- The person or company making the statement intends that their statement will be relied on. This means that the person hearing or reading the statement is intending to take an action they would not have taken, or withhold action that they would have taken, based at least in significant part on the statement. For example, the salesman saying that only 400 vehicles were made when he knows otherwise intends for his statement to be relied on to make a sale.
- The statement is relied on by another person without them knowing it is false. Not only must the person making the statement intend that it be relied on, but it must also actually be relied on by the listener or reader. For example, if the seller of an old home says that the roof is in good condition when they know this is untrue, there is still no fraud if the buyer has a roof inspection performed and relies on that information instead.
- The statement results in damages to the person who relied on it. There is no claim for what almost occurred or what the wrongdoer attempted. For example, if the seller of a piece of residential real estate tells a commercial developer the property is located within School District A when it is actually located within School District B, the buyer has no fraud claim if each school district is as good as the other from the standpoint of prospective customers.
Every one of these elements is important. If any of them are missing, there is no fraud case. We recommend you go through these step by step to make sure your case meets each criteria. To recap, these are the needed elements for a fraud and misrepresentation case:
- A person or company makes a false statement.
- They make that statement intending for the receiver of the false statement to use the information.
- The receiver does use the information without knowing the statement is false.
- This use of information results in damages.
For examples of each point, please read the italicized examples provided above.
Negligent or Innocent Misrepresentation
Michigan also permits claims for misrepresentation that were not made with malicious intent but were nonetheless false, fit the elements of fraud, and provide the person making the representation with a direct benefit. Thus, a real estate agent who repeats a statement made by a property owner – not knowing it is false – may nonetheless be responsible for innocent misrepresentation if they make commission based on a sale that would not have occurred without the misstatement.
Statutes of Limitation
In Michigan, fraud and misrepresentation can be governed by a six-year statute of limitations when it occurs within a contract, or three years if it is fraud accomplished wholly apart from contract. In addition, if the circumstances of the fraud are concealed and unknown to the victim, the statute of limitations may not run until the victim knows or could have known that fraud occurred.