CONSUMER PROTECTION LAW
REGULATION OF VOLUNTARY DISCLOSURE
Common Law Approach Fraudulent Misrepresentations, Omissions, and Other Devices
· Introduction
o Contract and tort relevant in consumer protection law because …
§ K and tort remain valid means and causes of actions (modern notice based pleading allowing to put down as many causes as possible to see what you can prevail on)
§ Both concepts found at heart of consumer protection law
· Causes of action
o Contracts: breach, fitness for a particular purpose, warranties; largely limited to damages, particularly recession of contract
o Torts (allocating fault as a means of paying for a wrong): fraud, deceit, misrepresentation, negligence; more likely to have equitable relief; relationship relevant to determine duty
· Any type of consumer protection law: see what sticks—K, tort, specific statutes, “Little FTC” acts, writing letters to the FTC because effecting consumers (because only FTC can bring suits at FTC Actà can decide to bring the suit or initiate investigations)
o Creation of FTC in 1914 (Federal Trade Commission) which prohibits “unfair and deceptive acts and practices”
§ (federal) FTC is the only one that can bring suit under the FTC Act
§ All states and DC to make their own consumer protection act= “Little FTC” Acts
· Written to be pro consumer; make it easier to prove consumer protection violation, pro se litigation, attorney fees, worth wild to bring suits because of multiple damages
· all say about same thing, except in state of Iowa, individuals, states can bring suits against Little FTC (as opposed to federal); all say “unfair and deceptive acts and practices”
· If injured and effects others, can bring suit if it will help others as well via a quasi purpose because acting to protect those (similar) who are injured or may be injuredà makes it more attractive to bring suit with multiple damages (ie, double or treble damages)
§ Other: specific consumer protection statutes in states (ie, lemon laws)
· Negative option plans: have to pay for the product until you are able to cancel (DVD clubs, companies without letting people cancel memberships, 30 days free, etc)
o Helping society as a whole doesn’t mean that you are helping an individual; purpose of consumer protection laws is to help individuals
§ Defense of businesses usually to help society as a whole, but must help the consumer via consumer protection laws
§ Practicability: effects every business and every person; most consumer protection laws apply to those who are in the regular business of goods and commerce
o Warranties and relief
§ Express warranty: product will do something
· Under the UCC: created when affirmation of fact or promise made by seller to buyer relating to goods and becomes basis for bargain
· Goods must conform to affirmation
· Specific words such as “warrant” and “guarantee” not required; intent to create not required
· Affirmations of value of goods or statements of seller’s opinion not create warranty
§ Implied warranty: product will do what it was intended to do
§ Equitable relief: making someone whole
§ Legal relief: damages
o Redress for purchasers relying on false representations of sellers considers
§ Nature of transaction
§ Blameworthiness or innocence of speaker
§ Form of remedy sought
· Express Misrepresentation
o Proving fraud:
§ Representation
§ Falsity of representation
§ Materiality of representation
§ Speaker has to have knowledge of falsity or his ignorance of truth
§ Speaker’s intent that it should be acted on by person of falsity of representation
§ Reliance
§ Reasonable to rely
§ Injury
o When you make a material representation about a fact, you cross the line
§ “puffery”: no one takes seriously and not a material fact; meaningless statements or unimportant exaggerations (“You’ll love this car”)
§ Odometer is
ew the truth) AND
§ Injury by the party acting in reliance
o Caveat emptor:
§ Conditions for CE
· Defect must be open to observation or discoverable on reasonable inspection
· Purchaser must have unimpeded opportunity to examine property AND
· Vendor may not engage in fraud
o Seller not obligated to reveal all she knows; duty on purchaser to make inquiry and examination
o Vendors with duty to disclose material facts which are latent, not readily observable or discoverable through a purchaser’s reasonable inspections (exception)
§ Purchaser must show an affirmative misrepresentation or misstatement of material fact in order to demonstrate fraud and apply CE
§ Affirmative duty to ask questions on buyer (Layman v. Binns–Ohio), affirmative duty on seller to disclose (Johnson v. Davis–FL) when not readily observable
· Majority rule with real property is CE for policyà courts reluctant to always see if you are treated fairly and you must look into it:
o Homes are most expensive things people buy
o Homes are complicated
o so many things that can go wrong
· wanting to make exceptions
o consider sympathetic plaintiff
o under best circumstance, would defect be readily observable or remain hidden
o fraud, misrepresentation, active concealment (active concealments of defects=fraud), etc
§ When things are too good to be true, government not protecting those who do stupid things (government not there to protect people from themselves; consumer protection to protect those who cannot protect themselves)
