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Say, Person A owns a rare postage stamp which is worth 2000€ according to the stamp collector community, but A doesn't know the worth.

Person B sees that A has a rare stamp and offers to buy it for a fraction of its worth. B offers A 100€ for the stamp and A agrees happily.

Later, A finds out the true value of the stamp and wants it back. A claims that B scammed them.

Is B guilty of fraud, simply for not telling A how much the stamp is worth?

  • You might want to add your location, as this might change the answers. I want to add another wrinkle... If the above is not fraud, would it become fraud if B specifically tells A that "the stamp is only worth 100 Euros"? – James Mar 3 '17 at 12:57
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    I'd consider it fraud, as that is a false statement – MechMK1 Mar 4 '17 at 10:18
  • @James To answer your question: No, because that is still B's statement of opinion. It would be a fraudulent representation only if B told A something like "The stamp collector community values it at 100€" despite knowing that this is false. – Iñaki Viggers Jun 9 '18 at 20:30
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UK-based answer here:

The crux of your question revolves around whether the buyer(B) had committed an illegal act by withholding information that would have prevented the seller(A) from selling the good at the price he did. The act that B would seemingly be guilty of would be fraudulent misrepresentation

A misrepresentation is a false statement of fact or law which induces the representee to enter a contract.

The important thing here is if there is a "false statement".

In your scenario, there was no false statement made, let alone one which induced A into selling his stamp to B.

So there is no fraudulent misrepresentation, or misrepresentation of any kind.

Looking at the law of fraud:

s3 Fraud Act 2006: A person commits fraud by failing to disclose information when =>

The defendant:

  1. failed to disclose information to another person
  2. when he was under a legal duty to disclose that information
  3. dishonestly intending, by that failure, to make a gain or cause a loss.

With regards to the scenario you've given, no fraud would have been committed because the buyer was under no legal duty to disclose such information

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In general, the "value" of anything is the price a buyer and seller agree on - if one has knowledge the other doesn't, that is not fraud. Fraud requires a deliberate deception - if, in response to a direct question from the seller, the buyer were to state that the stamp was not valuable, knowing that it is, then they have committed fraud.

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    Is that really true? Has a buyer ever been successfully persecuted for this kind of deception? – user3467349 Mar 3 '17 at 13:56
  • @DaleM For it to be a fraudulent representation, B would have to state it in a way that is objectively verifiable as false (for instance, by saying that the official price is 5 €). However, saying "the stamp is not valuable" still retains enough subjectivity to preempt a viable claim of fraud. – Iñaki Viggers Jun 9 '18 at 20:39
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I agree with Shazamos's result, but not with his reasoning. B's offer contains several statements: of fact and opinion.

First, by offering A 100€, B expresses his current intention to enter into a legally binding contract with A in regard to the stamp. By accepting the offer, one can infer that A was induced by this statement. However, the statement is true, as stamp and money changed hands.

Second, B's offer implies that the stamp is worth 100€. Despite the market value of the stamp being considerably higher, this statement is true, because B only expresses that the stamp is at least 100€ worth to him personally. By contrast, where B is a professional stamp collector, who knows the market value of the stamp, and A relies on B's expertise, the result maybe different.

In conclusion: without holding himself as an expert to A, B did not fraudulently misrepresent to him.

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    Are you saying that if B is known to A to be a philatelist then the transaction is fraudulent? – feetwet Mar 4 '17 at 13:55
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    Potentially, yes. – Singulaere Entitaet Mar 4 '17 at 14:07
  • @SingulaereEntitaet I am NOT voting down this answer (and I never vote articulated ones, regardless of whether I agree with them), but the last part of your analysis and conclusion are wrong. B's expertise is irrelevant to the issue of fraud because A did not hire B to advise him on stamp worth. B's expertise and/or his ostentation thereof does not by itself create a fiduciary duty with respect to A. – Iñaki Viggers Jun 9 '18 at 20:47
  • @feetwet See my comment to this answer. – Iñaki Viggers Jun 9 '18 at 20:47
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Under U.S. law, the answer is somewhat similar to the one given by @ShazamoMorebucks but there are additional prerequisites for the transaction to be considered a fraud or scam.

One prima facie element of fraud is A's reasonable reliance on B's representation. Here, A and B are on the opposite sides of a contract, whence it is evident and expected that each party will pursue his own interest. In this context of competing interests, it was not reasonable for A to rely on B's statements (absent any guarantee or objective assurance given by B). Moreover, B did not even state that the stamp is worth 100€: He merely offered 100€ to A in exchange for the stamp.

Another prima facie element of fraud is that A incurs a loss as a result of B's representation. ShazamoMorebucks refers to the absence of a legal duty of disclosure, but I take a different approach:

It is wrong to conclude that A incurred a loss at all. Up until the transaction, A underestimated his stamp to the extent that he "agree[d] happily" when B offered 100€ in exchange for the stamp. A's reaction and decision show that A deemed the transaction profitable. The fact that A later realized he could have asked more money does not render the transaction an instance of fraud.

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