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Consumer Law
University of South Carolina School of Law
Nelson, Eboni S.

Consumer Law

1) Common Law Fraud
a) Elements
i) Misrepresentation of an existing fact
(1) Mere opinion will not generally arise to this level unless you know your opinion is false
(2) Expressing an opinion that you KNOW not to be true, can rise to the level of misrepresentation of an existing fact
(a) The difficulty in practice is how you prove they KNEW
(b) Courts are hesitant to turn sales talk and opinions into misrepresentation
(3) When you are intentionally disclosing information that is material to the transaction to INDUCE the person into the transaction, that is when you are getting to the level of fraudulent inducement
ii) Whether the defendant knew or should have known of the falsity
iii) Justifiable reliance
(1) This is not the same as reasonable reliance
(2) The sophistication of the parties comes into play in this element. The more sophisticated the plaintiff is, the less likely their reliance would be considered justifiable (Fischer v Chinchilla Case)
iv) Actual damages
b) Remedies
i) Monetary Remedies
(1) Out of Pocket Rule
(a) Minority Rule
(b) It is the loss naturally and proximately resulting from the fraud, and it will usually be the difference of what the plaintiff parted with and what he got
(c) It is a question of what the plaintiff lost. The court is looking at the difference of the value between what he gave in consideration and what he actually received
(d) Minnesota follows this rule so in the Chinchilla Case, the court awarded the plaintiff the money they spent on the investment
(i) Cages, food, supplies, gas for going to conference
(2) Benefit of the Bargain rule
(a) Majority Rule
(b) This is about expectancy
(c) The plaintiff is allowed to receive the benefits of the bargain as if the contract had gone through as intended
(d) Wisconsin applies this rule so this is what they applied to the Wisconsin plaintiffs
(e) The plaintiff wants to recover the money they were expected to make, including the lost profits
(f) UCC 7-721- you can still get your benefit of the bargain damages even when you are also going to get a rescission of a contract.
(i) Allows for recovery of any and all damages under Article 2 of the UCC
(ii) South Carolina follows the benefit of the bargain rule (but it looks like the out of pocket rule from the book)
1. The difference in value as promised and the difference in value as received
2. Difference between actual value at the time of sale and expected value
(3) Punitive Damages:
(a) To discourage the behavior by this defendant and anyone thinking of engaging in such behavior
(b) To punish the wrongdoer and to deter other people from committing the same acts
(c) Awarded when the behavior was grossly negligent and involves high moral culpability
ii) Equitable remedies
(1) Rescission- fraud is ground for rescinding the contract and forcing the defendant to return any property belonging to the plaintiff
(a) Canceling the contract and putting the parties where they would have been had the contract never been entered into
2) Motor Vehicle Information and Cost Savings Act (Odometer Act)
a) Purpose
i) The purpose behind this statute is to stop people from tampering with the odometers of cars. It was a big business for sellers of cars to roll back odometers and was a lot of fraudulent activity
b) Prohibited Conduct
i) This statute prohibits:
(1) Tampering with the odometer.
(2) The selling and installing and use of devices that is meant to roll back
(3) Driving a car in which you know the odometer is not working, with the INTENT to defraud
(4) Giving a false statement to the transferee in making the disclosure of the miles
ii) There must be a violation of this act plus AN INTENT TO DEFRAUD in order to recover under this act
c) Required Disclosures
i) It places a lot of importance on keeping accurate records or the mileage of the car
(1) You must either disclose the actual mileage of the car of that the actual mileage of the car is unknown
d) Remedies
i) Civil penalties brought by the government
(1) Not more than $2,000 for each

act
iv) A violation if this act qualifies as a violation of Section 5 of the FTC
(1) Attorney general can go after them and get up to $10,000 for violation of this act
c) Recipient’s Rights Upon Receipt
i) Any merchandise mailed in violation of this act can be kept as a gift to the recipient and the recipient can do with it what they want
4) Federal Trade Commission Act (15 U.S.C. § 41-58; *§§ 45,57b)
a) Purpose – established to deal with a whole host of different problems
b) Prohibited Conduct (FTC §5 violation)
i) Unfair methods of competition
(1) Condemns unfair or deceptive acts or practices
(2) Sets forth the penalties the commission can impose
(a) $10,000 per violation- deters the cause of action from occurring in the first place which makes up for the fact that FTC does not have enough manpower to really regulate this
c) Generally no private cause of action
d) Remedies: voluntary consent decree, cease and desist order, statutory penalties for violations of order
5) Credit Practices Rule (16 C.F.R. Part 444)
a) Purpose and Applicability
i) Purpose of the act is prohibiting the consumer credit transactions that certain provisions are not allowed to be part of the transaction
(1) Purpose is to prevent the types of contract provisions that would be extremely harmful to the consumer is they default
(2) Also meant to protect the co-signers
(a) You can’t be mislead as a co-signer. You need to know what you are signing for
(b) 444.3-notice that has to go to the co-signer to tell them what their rights are
(3) Look for this any time you are dealing with the extension of the credit to a consumer