C. Elements Defined

• Library: Elements of Civil Causes of Action (SCBar) (2021 Ed.)

C. Elements Defined

1. A Representation

The representation must be a statement or "communicative actions"⁷ concerning an existing fact.⁸ Conduct as well as express words may fulfill the element.⁹ Generally such things as "puffing"¹⁰ or "sales talk," statements of opinion,¹¹ predictions of future events,¹² promises¹³ or statements of law¹⁴ are not actionable.

2. Falsity

Where a statement is literally true, but can within the context of events, result in misrepresentation it may be considered a false representation if its maker knows the statement can be interpreted in a way that is false.¹⁵ Silence may also be considered a false representation where there is a duty to disclose facts.¹⁶ While ordinarily there is no duty to disclose, there are exceptions: (1) a fiduciary relationship;¹⁷ (2) a party knows material facts that cannot be discovered by the other party;¹⁸ (3) the nature of a transaction calls for good faith and fair dealing.¹⁹

3. The Speaker Ought to Have Known of the Falsity

It does not appear that any South Carolina case has actually delineated the elements of a cause of action for constructive fraud. The South Carolina Supreme Court has held neither intent to deceive nor actual dishonesty is an element.²⁰ The Court of Appeals has said all elements of fraud except intent must be proved for constructive fraud to be established,²¹ and that it is sufficient that it be alleged the defendant ought to have known the falsity of the misrepresentation.²²

4. Materiality

A representation will be considered material where an objective, reasonable person would have viewed it as sufficiently important and significant that it would have played a role in the decision to enter the transaction.²³

5. Intent that the Representation Be Acted Upon

In order for this element to be met, the defendant must intend for the plaintiff to rely on the statement.²⁴ The defendant may intend the plaintiff to rely on the representation without dishonesty of purpose or intending that it deceive him or her.²⁵

6. The Hearer's Ignorance of Its Falsity

Ignorance of the falsity of the misrepresentation is an element because the plaintiff could not have relied on the truth of the statement if he or she knew it was false.²⁶

7. The Hearer's Reliance on Its Truth

If the plaintiff would have entered the transaction regardless of the truth of the representation,²⁷ or only did what was legally required then there is no fraudulent inducement.²⁸

8. The Hearer's Right to Rely Thereon

Reliance on the misrepresentation must be reasonable or legitimate Whether reliance is justified depends on the circumstances of each case.²⁹ In a constructive fraud case involving an arms length transaction between mature educated individuals, there is no right to rely absent a confidential or fiduciary relationship.³⁰ Courts evaluate fraud cases by considering "the respective intelligence, experience, age and mental and physical condition of the parties and the relation and respective knowledge and means of knowledge of the parties."³¹ An early case held that where one who pleads fraud contributes as a proximate cause to the injury by willful or reckless misconduct, no recovery should be permitted.³² Where the falsity of the misrepresentation could have been discovered, courts generally apply the "just doctrine"³³ although different tests have been employed.³⁴ Generally, there is a right to rely so long as the reliance is not reckless or grossly negligent; however, even where reliance might be characterized as reckless, it must be shown the recklessness caused the reliance.³⁵

9. The Hearer's Consequent and Proximate Injury

There must be injury before an action in tort for constructive fraud will lie.³⁶

Recovery will be denied where the damages are too speculative³⁷ or where the injury is not shown clearly.³⁸

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Notes:

^[7] Carter v. Boyd Construction Co., 255 S.C. 274, 178 S.E.2d 536 (1971).

^[8] Woods v. State, 314 S.C. 501, 431 S.E.2d 260 (Ct. App. 1993) (alleged representation must be one of existing fact; constructive fraud case); Moye v. Wilson Motors, Inc., 254 S.C. 471, 176 S.E.2d 147, 152 (1970) (fraud must relate to a present or existing fact).

^[9] Satcher v. Berry, 299 S.C. 381, 385 S.E.2d 41 (Ct. App. 1989) ("misrepresentations by conduct, as well as by express words, will support an action for fraud."). See also Sparrow v. Toyota of Florence, Inc., 302 S.C. 418, 396 S.E.2d 645, 647 (Ct. App. 1990). In Sparrow, a dealer sold a car knowing it was used but misrepresented it as new by placing it on a new car lot, writing the word new on the window sticker, and giving a false explanation of the mileage. The court held the jury could have found the dealer knowingly and falsely represented the vehicle by words and conduct.

^[10] Jones v. Cooper, 234 S.C. 477, 109 S.E.2d 5, 10 (1959) (advertisement with statements about the possibilities of profit from hot dog machines was merely "dealer talk" or "puffing" and could not be construed as fraud and deceit). But see Satcher v. Berry, 299 S.C. 381, 385 S.E.2d 41 (Ct. App. 1989) (where seller claimed land was "best peach land in the county," the statement was more than puffing when seller planted trees in diseased soil before sale giving appearance of healthy trees growing on the land).

^[11] Gilbert v. Mid South Mach. Co. Inc., 267 S.C. 211, 227 S.E.2d 189 (1976) (generally action for fraud must be based on misstatements of fact rather than of opinion); Williams v. Bruce, 110 S.C. 421, 96 S.E. 905 (1918) (where agent professed only to give opinion of value of timber and did not claim to be expert estimator, there was no concealment or misstatement of fact); Smothers v. United States Fidelity & Guaranty Co., 322 S.C. 207, 470 S.E.2d 858 (Ct. App. 1996) (not fraudulent for respondent to offer opinion on novel legal issue, even though it later proved incorrect); Triple "F," Inc. v. Gerrard, 298 S.C. 44, 378 S.E.2d 67, 69 (Ct. App.1989) (statements of agent that he was confident program for producing feed for dairy cattle would be endorsed by University was misstatement of opinion and ineffective to establish fraud); Winburn v. Insurance Co. of North America, 287 S.C. 435, 339 S.E.2d 142, 145 (Ct. App. 1985) (representations that an individual was a "good mechanic" were merely expressions of opinion). However, where a special relationship exists or the opinion involves factual matters, the element of representation may still be met. Bishop Logging Co. v. John Deere Indus. Equip. Co., 317 S.C. 520, 455 S.E.2d 183 (Ct. App. 1995).

^[12] Miller v. Premier Corp., 608 F.2d 973, 981 (4th Cir. 1979) (false prediction concerning future events made by someone with superior knowledge of events may constitute fraudulent misrepresentation).

^[13] Woods v. State, 314 S.C. 501, 431 S.E.2d 260, 263 (Ct. App. 1993) ("Unless the plaintiff can show the defendant made a promise of future action with no intent of fulfilling the promise at the time it was made, the representation cannot be the basis of an action for fraud."); Tom Hughes Marine, Inc. v. American Honda Motor Co., 219 F.3d 321 (4th Cir. 2000) (mere showing that party failed to keep promises insufficient to demonstrate actionable fraud; recourse for unkept promises confined to action in contract). However, where someone promises to do a certain thing and has at the time no intent of keeping the agreement, there is an actionable fraudulent misrepresentation of fact. Moye v. Wilson Motors, Inc., 254 S.C. 471, 176 S.E.2d 147, 152 (1970); Hansen v. DHL Laboratories, Inc., 316 S.C. 505, 450 S.E.2d 624, 626 (Ct. App. 1994), affirmed, 319 S.C. 79, 459 S.E.2d 850 (1995) (clarifying that evidence of fraud need not be pled with specificity to overcome parole evidence rule); Winburn v. Insurance Co. of North America, 287 S.C. 435, 339 S.E.2d 142, 145 (Ct. App. 1985) (actionable representation cannot consist of a mere broken promise, however, an action in fraud can be based on an unfulfilled promise of future...