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This question is inspired by this article.

  1. Alice purchases jewelry from dealer, Bob, for $15 million.
  2. Alice hires Carol to appraise jewelry.
  3. Carol advises Alice jewelry is worth $5 million.
  4. Alice sues Bob for $10 million.

Is there any legal theory under which Alice could win her suit against Bob? If so, what are the minimum facts Alice must prove?

Clarifying assumptions
  1. This is not a fraud case. Bob did not defraud Alice in the sense that he promised to deliver X and, instead, delivered Y.
  2. As a dealer, Bob knew the jewelry would appraise for $5 million when he sold it to Alice.
  3. Bob told Alice the purchase was a "great investment" that would "only go up in value."
  4. All legally required disclosures and disclaimers (if any) were made.
  5. The suit occurs after any statutory buyer's remorse period expires (if any).
  6. The sale took place in San Diego, California.
  • Not sure what 4 means. I don't think there are any disclaimers that would be legally required. But Bob could have made some (non-required) disclaimers that might substantially alter things. Also, for 1, this is a fraud case if it's anything. Alice may argue that Bob made material misstatements of fact about the merchandise in order to induce her to buy it, which if true would be fraud. – Nate Eldredge Apr 4 '18 at 1:18
  • No 3 premised by 2 is a clear misrepresentation made by Bob. Alice could win $10M damages for misrepresentation. – Greendrake Apr 4 '18 at 1:40
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    @NateEldredge: I think the point I'm working toward is that if no other obvious fraud is present other than "salesmanship" and a serious overcharge by Bob. If Alice does not protect herself with an independent appraisal before hand and simply accepts Bob's "first price," is Bob liable for Alice's oversight and naïveté? I think the point here might be: what are the limits (if any) of caveat emptor? – Mowzer Apr 4 '18 at 2:07
  • @Greendrake: See my above comment. – Mowzer Apr 4 '18 at 2:09
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Consideration

Consideration under a contract must be "sufficient" but it does not need to be "adequate".

Insufficient consideration falls under the following headings:

  • performance of a duty imposed by law
  • performance of a duty already imposed by contract
  • acceptance by the creditor of part payment by a third party
  • Composition with creditors
  • Moral obligation
  • Illusory or uncertain promises

Adequacy refers to whether the transaction represents a poor deal or not for either party - the law will enforce contracts that give effect to poor deals.

On the face of it jewelry on the one side and money on the other are both sufficient consideration to support a contract - the law does not care if they are adequate.

Basically, if you pay too much for something - tough titties.

Representations

A representation is a non-contractual statement of fact made by a party before or at the time of making a contract, addressed to the other party and in fact induces the party to enter the contract.

If the buyer can prove that the vendor made the statements that the jewelry was a "great investment" that would "only go up in value" then these would be misrepresentations - bearing in mind that this would need to be proved on a transaction by transaction basis since each is a separate contract.

There are legal remedies for misrepresentation in several areas of the law:

  • Some representations become terms of the contract - the innocent party must either sue for damages or recind for actionable misrepresentation.
  • If the misrepresentation led to a contract being entered into by mistake (which is a legal term of art and not applicable here), the contract may be void.
  • A misrepresentation may become a collateral contract.
  • If it is an "actionable" misrepresentation then the contract may be voidable
  • a negligent misrepresentation may give rise to the tort of negligence.
  • a fraudulent misrepresentation may give rise to the tort of deceit.
  • Consumer law may also provide remedies (I don't know enough about Californian law here to comment).

An "actionable" misrepresentation must have actually induced you to enter the contract, that is, you must have relied on that representation rather than your own judgement.

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