Contracts very regularly contain representations and warranties. Representations are statements of present facts that are meant to induce someone to act, for example, “There is no mold in this house.” Warranties are express or implied promises to act in the present or into the future, for example, “I’ll have my usual guy come out and handle the mold issues.” Sometimes, the contract will contain a provision that is both a representation and a warranty, for example, “Seller represents that the property is currently insured and will remain insured until closing.” Both representations and warranties are actionable; misrepresentation or fraud is the action for failed representations, inducement, or breach of warranty is the action for a failed warranty.
If someone is lying, the contract may be rendered unenforceable or void through that misrepresentation and fraud. The simplified test in Oregon for misrepresentations is to ask, “Did all of these occur? (1) did the misrepresenting party make a statement that was materially false? (2) did they know it was false? (3) did they intend for the other party to rely on that misrepresentation, (4) did the other party justifiably rely on the misrepresentation? (5) was the other party harmed due to the misrepresentation?” Strawn v. Farmers Insurance Co. of Oregon, 258 P3d 1199 (Or. 2011). If any of those five elements are not accurate, the claim will generally fail. This means: if the Seller is just forgetful? Not necessarily a misrepresentation. If the Seller says something outlandish that no reasonable person would believe (e.g. a Seller selling the White House or the Pentagon. Basically, nobody would reasonably believe the Seller had rights to sell it), it’s not necessarily a misrepresentation. If the Seller lied but the Buyer didn’t get injured (e.g. Seller said the house was painted Robin’s Egg Blue, but it was actually, in fact, sky blue), it’s not necessarily an actionable misrepresentation. Oftentimes, the SPDS is the most obvious place where this comes up, where a Seller takes their best crack at the SPDS and fills out some provisions incorrectly, but in good faith. The misrepresentation is oftentimes not actionable because it lacks intentionality to deceive, or knowledge of the deception.