§ 7.1.5

• Jurisdiction: Arizona

§ 7.1.5 Innocent Misrepresentation

Under the securities statutes, liability sometimes exists even for innocent misstatements.²⁰⁴⁸ The common law has not traveled so far. Although the Restatement provides for limited liability based on innocent mis-representations,²⁰⁴⁹ courts generally have rejected such liability.²⁰⁵⁰ No Arizona decision has approved damages based on common-law misrepresentation without at least negligence.

But material misstatements, even when innocent, may provide a defense to enforcement of a contract.²⁰⁵¹ A stock-subscription agreement or investment agreement providing for installment payments could undoubtedly be rescinded (or specific performance defeated) on the basis of the seller's material misstatements, even if innocently made.²⁰⁵²

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Notes:

^[2048] See, e.g., Rosier v. First Fin. Capital Corp., 181 Ariz. 218, 222, 889 P.2d 11, 15 (Ct. App. 1994). A due care defense does, however, exist...