Bar Exam (Uniform) Quiz: Misrepresentation

20 questions · exam conditions

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MisrepresentationQuestion 1 of 20

A landowner was selling a large parcel of rural land. A prospective buyer asked if the property had access to a public sewer line. The landowner truthfully stated, "No, it does not." The following week, before the parties signed a purchase agreement, the municipality sent the landowner a notice that a new sewer line would be extended to the property within six months, which would significantly increase its value but also subject it to a hefty special assessment tax. The landowner did not inform the buyer of this new development. The parties closed the sale, and the buyer was shocked to receive the tax assessment a few months later.

If the buyer sues the landowner for misrepresentation, what is the buyer's strongest legal theory? Select one.

The landowner engaged in active concealment by not providing the buyer with the municipality's notice.

The landowner had a duty to disclose the new information because his prior true statement became misleading.

The landowner made a negligent misrepresentation by failing to stay informed about municipal plans affecting the property.

The landowner cannot be held liable because his original statement about the sewer line was true when made.

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Bar Exam (Uniform) Quiz

Bar Exam (Uniform) Quiz: Misrepresentation

Practice Misrepresentation in Bar Exam (Uniform) with focused quiz questions that help you check what you know, review explanations, and build confidence with test-style prompts.

What this quiz covers

This quiz focuses on Misrepresentation, giving you a quick way to practice the rules, question types, and explanations that matter most for Bar Exam (Uniform).

How to use this quiz

Try each quiz question before looking at the correct answer. Use the explanations to review missed ideas, then come back to similar questions until the pattern feels familiar.

All questions

Question 1

If the buyer sues the landowner for misrepresentation, what is the buyer's strongest legal theory? Select one.

The landowner engaged in active concealment by not providing the buyer with the municipality's notice.
The landowner had a duty to disclose the new information because his prior true statement became misleading. (correct answer)
The landowner made a negligent misrepresentation by failing to stay informed about municipal plans affecting the property.
The landowner cannot be held liable because his original statement about the sewer line was true when made.

Explanation: The correct answer is B. While there is generally no duty to disclose, an exception arises when a person makes a representation that they believe is true but later discover is false or has become misleading due to changed circumstances. The landowner had a duty to update his initial, truthful statement once he received the notice from the municipality, as his silence allowed the buyer to continue relying on a statement that was no longer the whole truth. A is incorrect because active concealment involves taking steps to hide a fact, which the landowner did not do; his tort was one of omission. C is incorrect because the claim is not based on negligence in discovering information, but on the failure to disclose information he actually possessed. D is incorrect because it ignores the duty to correct a statement that has become misleading before the transaction is consummated.

Question 2

You represent a client who bought a restaurant. The seller provided your client with financial statements for the past three years. The statement for the most recent year was negligently prepared by the seller's accountant and showed a profit of $100,000, when the restaurant had actually broken even. The statements for the two prior years were accurate and showed only minimal profits. Your client reviewed all three statements but was primarily influenced by the most recent one. After buying the restaurant, your client is struggling to make it profitable.

Your client wants to sue the accountant for negligent misrepresentation. The accountant argues that she owed no duty to your client. In a jurisdiction that follows the Restatement (Second) of Torts, what fact would be most helpful to your client's case? Select one.

That it was foreseeable that any potential buyer of the restaurant would rely on the financial statements.
That the seller told the accountant he was preparing the statements to show to a specific, identified group of potential buyers, including your client. (correct answer)
That the accountant was paid by the seller to prepare the financial statements.
That the accountant's negligence was gross, rather than ordinary, negligence.

Explanation: The correct answer is B. Under the Restatement view for negligent misrepresentation, a professional's liability to third parties extends to the limited group of persons for whose benefit and guidance the professional knows the information is being supplied. If the seller informed the accountant that the statements were specifically for a group of potential buyers that included your client, then your client falls within that protected class. A describes the broader, minority foreseeability rule. The Restatement requires more than mere foreseeability. C is irrelevant to the question of duty to a third party. D is relevant to the level of fault, but it does not establish the existence of a duty to your client in the first place, which is the threshold issue.

Question 3

A prospective car buyer asked a used car salesman about a specific convertible on the lot. "Has it ever been in an accident?" the buyer asked. The salesman, who had just taken the car on trade-in and had not reviewed its history, replied, "Absolutely not. This car is clean as a whistle." The salesman had no factual basis for this statement but made it to close the sale. In fact, the car had been in a major collision and was improperly repaired. The buyer purchased the car and later discovered its history when the frame began to show signs of structural fatigue.

If the buyer sues the salesman for fraudulent misrepresentation, will the buyer likely prevail on the element of scienter? Select one.

Yes, because the salesman made a statement of fact with reckless disregard for its truth or falsity. (correct answer)
No, because the salesman did not have actual knowledge that the car had been in an accident.
No, because the statement was mere puffery that a reasonable buyer would not have relied upon.
Yes, because the salesman was negligent in failing to check the vehicle's history before making a definitive statement.

Explanation: The correct answer is A. Scienter, an element of fraud, can be established by showing either that the defendant knew the statement was false or acted with reckless disregard for the truth. Here, the salesman made a definitive factual assertion ("Absolutely not") without any knowledge or basis for it. This conscious ignorance or assertion of a fact as known when it is not constitutes reckless disregard for the truth, which satisfies the scienter requirement. B is incorrect because actual knowledge is not required; reckless disregard is sufficient. C is incorrect because a statement about a car's accident history is a statement of specific fact, not mere opinion or puffery like "it's a great car." D is incorrect because while the salesman was negligent, his conduct rises to the level of recklessness, which satisfies the higher standard for intentional fraud, not just negligent misrepresentation.

Question 4

An art dealer was negotiating the sale of a painting to a collector. The dealer, who had years of experience, told the collector, "In my expert opinion, this painting is an undiscovered masterpiece that will be worth at least double its price in five years." The dealer genuinely believed this, but had not performed a thorough authentication, which would have revealed the painting was a clever forgery. Relying on the dealer's statement, the collector purchased the painting for $100,000. One year later, the painting was appraised and confirmed to be a forgery worth only $500.

If the collector sues the art dealer for fraudulent misrepresentation, what is the most likely outcome? Select one.

The collector will win, because the dealer's statement was a false representation of a material fact.
The collector will lose, because the dealer's statement was a non-actionable opinion about future value.
The collector will lose, because the dealer did not have the required scienter for fraud. (correct answer)
The collector will win, because the dealer, as an expert, had a duty to authenticate the painting before offering an opinion.

Explanation: The correct answer is C. A key element of fraudulent misrepresentation is scienter, meaning the defendant knew the statement was false or acted with reckless disregard for its truth. The facts state that the dealer genuinely believed the painting was a masterpiece. While the dealer may have been negligent in failing to authenticate the painting, this lack of due care does not rise to the level of scienter required for fraud. A is incorrect because while the statement was ultimately false, the lack of scienter is fatal to a fraud claim. B is incorrect because a statement of opinion from an expert to a layperson can be treated as a statement of fact, especially when it implies the speaker has a factual basis for the opinion. D describes a basis for a negligence claim, not an intentional fraud claim. The dealer's failure might constitute negligence, but it does not establish the intentional or reckless state of mind for fraud.

Question 5

A real estate agent represented a seller of a commercial property. The agent told a potential buyer that a major national retail chain had "expressed strong interest" in renting the adjacent vacant lot, which would significantly increase foot traffic to the property. In reality, a representative from the retail chain had made a single, non-committal inquiry several months earlier and had not followed up. The agent was aware of this but exaggerated the level of interest to make the property seem more attractive. The buyer purchased the property, and the adjacent lot remained vacant, depressing the property's rental income.

The buyer sued the real estate agent for fraudulent misrepresentation. The agent defends by claiming his statement was too vague to be a representation of fact. Is the buyer likely to succeed? Select one.

Yes, because the agent's statement falsely implied a current and substantial negotiation was underway, which is a misrepresentation of fact. (correct answer)
No, because the term "strong interest" is subjective and constitutes non-actionable puffery or opinion.
No, because the agent owed a fiduciary duty only to the seller, not to the buyer.
Yes, but only if the buyer can prove that the agent owed him a fiduciary duty.

Explanation: The correct answer is A. While sellers and their agents are allowed some latitude for "puffing," a statement that implies a specific factual basis can be an actionable misrepresentation. Here, stating a major retailer has "strong interest" is not just vague praise; it implies a particular state of business negotiations that did not exist. The agent knew the interest was minimal and stale. This exaggeration amounts to a false representation of a material fact intended to induce reliance. B is incorrect because, in this context, the statement goes beyond mere opinion. C is incorrect; while the agent's fiduciary duty is to the seller, the agent still has a duty to third parties, like the buyer, not to commit fraud. D is incorrect for the same reason; a fraud claim is not dependent on a fiduciary relationship.

Question 6

A woman was considering investing in a friend's startup business. To assess the risk, she asked to see the company's financial records. The friend, knowing the company was losing money, created a fake balance sheet showing a significant profit and gave it to the woman. The woman looked at the balance sheet but thought the business seemed too risky anyway and decided not to invest. A week later, she won the lottery and, feeling generous and no longer concerned about the risk, invested $50,000 in the friend's business without looking at the balance sheet again. The business failed, and she lost her entire investment.

If the woman sues her friend for fraudulent misrepresentation, what is the most likely reason her claim will fail? Select one.

The misrepresentation was not material.
The friend did not intend for her to rely on the statement.
The woman did not actually rely on the misrepresentation. (correct answer)
The woman's loss was not caused by the misrepresentation.

Explanation: The correct answer is C. A critical element of any misrepresentation claim is justifiable reliance, which functions as the causation link between the defendant's misrepresentation and the plaintiff's harm. The plaintiff must show that the misrepresentation was a substantial factor in their decision to enter the transaction. Here, the woman explicitly decided not to invest after seeing the fake balance sheet. Her later decision to invest was based on an unrelated event (winning the lottery) and a feeling of generosity, not on the financial information. Therefore, she did not actually rely on the friend's misrepresentation, and her claim for fraud will fail. D is closely related, but C is more precise. The failure of reliance is what breaks the chain of causation. A is incorrect; the company's profitability is clearly material. B is incorrect; the friend clearly intended to induce reliance.

Question 7

A man was selling a vintage watch. A potential buyer asked, "Is this an authentic 1968 model?" The seller, who had inherited the watch and knew nothing of its history, replied, "I'm not an expert, but it has always been in my family and I have no reason to believe it isn't." In fact, the watch was a counterfeit. The seller's statement was made in good faith. The buyer purchased the watch for $5,000. An authentic 1968 model would be worth $8,000. The counterfeit is worth $100.

If the buyer sues the seller for misrepresentation, which of the following claims is most likely to succeed? Select one.

Fraudulent misrepresentation, because the seller made a false statement that induced the sale.
Negligent misrepresentation, because the seller had a duty to investigate the watch's authenticity before offering it for sale.
Innocent misrepresentation, because the seller made a false statement of material fact, even without fault. (correct answer)
No claim will succeed, because the seller qualified his statement and indicated his lack of expertise.

Explanation: The correct answer is C. The seller made a false statement of a material fact (the watch's authenticity) that induced the sale. Since the seller made the statement in good faith and without knowledge of its falsity, there is no scienter for fraud (ruling out A). There is likely no negligence, as a casual private seller generally does not have a professional duty to investigate the provenance of an inherited item (ruling out B). However, an action for innocent misrepresentation is possible. This tort requires only a material misrepresentation that is justifiably relied upon, regardless of the defendant's fault. It typically allows for rescission or, in some jurisdictions, out-of-pocket damages. D is incorrect because even a qualified statement can be a misrepresentation if it is reasonably interpreted as an assertion of fact, and in the context of a sale, it was likely relied upon by the buyer.

Question 8

If the buyer sues the landowner for misrepresentation, what is the buyer's strongest legal theory? Select one.

The landowner engaged in active concealment by not providing the buyer with the municipality's notice.
The landowner had a duty to disclose the new information because his prior true statement became misleading. (correct answer)
The landowner made a negligent misrepresentation by failing to stay informed about municipal plans affecting the property.
The landowner cannot be held liable because his original statement about the sewer line was true when made.

Question 9

A woman purchased a rare book from a dealer for $10,000. The dealer honestly but mistakenly represented the book as a first edition, a fact that was material to the sale. The dealer had reasonable grounds for his belief, having purchased it from a reputable source. Had the book been a first edition, its market value would have been $15,000. As a second edition, its actual market value is $4,000. The woman has decided to keep the book but wants to sue the dealer for misrepresentation.

Assuming the dealer is liable for innocent misrepresentation, what is the most likely measure of damages the woman can recover in a tort action? Select one.

$15,000, representing the full value of the book as represented.
$11,000, representing the difference between the value as represented ($ 15,000) and its actual value ($4,000).
$10,000, representing a full refund of the purchase price.
$6,000, representing the difference between the price paid ($ 10,000) and its actual value ($4,000). (correct answer)

Explanation: The correct answer is D. This question tests the typical remedy for innocent or negligent misrepresentation, which is distinct from fraudulent misrepresentation. While some jurisdictions allow 'benefit-of-the-bargain' damages for fraud (Choice B), the more common remedy for non-fraudulent misrepresentation is to compensate the plaintiff for their 'out-of-pocket' loss. This is calculated as the difference between the price paid and the actual value of the property received. Here, the woman paid $10,000 and received a book worth $4,000, so her out-of-pocket loss is $6,000. A represents the full value as represented, which is not a standard measure of damages. B represents the benefit-of-the-bargain measure, usually reserved for fraud. C represents rescission (undoing the contract), which would require her to return the book.

Question 10

If the woman sues her friend for fraudulent misrepresentation, what is the most likely reason her claim will fail? Select one.

The misrepresentation was not material.
The friend did not intend for her to rely on the statement.
The woman did not actually rely on the misrepresentation. (correct answer)
The woman's loss was not caused by the misrepresentation.

Question 11

You are representing a client who purchased a small commercial building to open a restaurant. During negotiations, the seller told your client that the building's plumbing system was "completely replaced two years ago and is in perfect working order." The written sales contract contained a clause stating, "Buyer accepts the property in its 'as is' condition and has not relied on any representations by Seller not contained in this writing." The contract made no mention of the plumbing. After the sale, your client discovered that only a small portion of the plumbing had been replaced and the rest was original and corroded, requiring a $50,000 replacement. The seller knew his statement was false.

Your client wants to sue the seller for fraudulent misrepresentation. The seller's attorney argues the 'as is' and merger clauses in the contract bar the claim. What is your strongest counterargument? Select one.

The 'as is' clause is unconscionable and therefore unenforceable against your client.
The parol evidence rule does not bar evidence of prior fraudulent misrepresentations, even with a merger clause. (correct answer)
The seller's oral statement created an express warranty that cannot be disclaimed by a general 'as is' clause.
There was a mutual mistake of fact regarding the condition of the plumbing, allowing for rescission of the contract.

Explanation: The correct answer is B. This question tests the intersection of torts and contracts. A widely recognized exception to the parol evidence rule is that it does not bar extrinsic evidence to show that a contract was induced by fraud. Even a specific merger clause or an 'as is' clause generally cannot be used to shield a party from liability for their own fraudulent statements. The public policy against fraud outweighs the policy favoring the finality of written contracts. A is unlikely to succeed, as 'as is' clauses in commercial transactions are rarely found to be unconscionable. C is a contract argument (breach of warranty), but the tort claim of fraud is a stronger path as it allows for tort damages and is not barred by the contract's terms. D is incorrect because this is not a mutual mistake; the seller knew the true condition, making it a case of unilateral mistake induced by fraud.

Question 12

A city planning department official was asked by a developer about the zoning of a specific parcel of land. The official, misreading the official zoning map, negligently told the developer that the parcel was zoned for commercial use. In reliance on this statement, the developer spent $200,000 on architectural plans for a shopping center. When the developer applied for building permits, the city correctly determined that the parcel was zoned only for residential use, rendering the plans worthless. The developer sued the city official for negligent misrepresentation.

Assuming the official is not protected by sovereign immunity, what is the developer's biggest obstacle in recovering from the official? Select one.

Proving that the official's statement was a statement of fact rather than law.
Proving that the developer's reliance on an oral statement from a government official was justifiable.
Overcoming the general rule that public officials are not liable to the general public for negligence in performing their duties.
Showing that the official owed a duty of care to this specific developer rather than the public at large. (correct answer)

Explanation: The correct answer is D. This question tests the 'public duty' doctrine. For negligent misrepresentation by a government entity or official, the plaintiff must typically show that the defendant owed a 'special duty' to the plaintiff, beyond the general duty owed to the public. Merely answering a question from a member of the public may not create this special duty. The developer must prove that by giving specific advice directly to him, knowing he would rely on it for a specific transaction, the official assumed a special duty. A is incorrect because a statement about a parcel's current zoning is a statement of fact. B is a plausible but weaker argument; relying on a planning official is often considered justifiable. C is another way of stating the public duty rule, but D is more precise. The key is not a blanket immunity (as C might imply), but the need to establish a specific duty to the individual plaintiff, which is the core of the special relationship exception to the public duty rule.

Question 13

To induce a farmer to sell a piece of farmland, a developer told him, "I intend to build a beautiful community park on this land for all the local children to enjoy." The farmer, who cared deeply about his community, was moved by this and agreed to sell the land to the developer for a price below market value. In reality, the developer had no such intention and had already signed contracts to build a high-density apartment complex on the site. Once the sale closed, the developer began construction of the apartments.

If the farmer sues the developer for fraudulent misrepresentation, will the farmer likely succeed? Select one.

Yes, because the developer made a false statement about his present-day intention, which is a misrepresentation of a material fact. (correct answer)
No, because a statement about future conduct is not a misrepresentation of an existing fact and cannot be the basis for fraud.
No, because the farmer's motivation for selling is not legally relevant to the enforceability of the sales contract.
Yes, but only if the promise to build a park was included as a covenant in the written deed or sales contract.

Explanation: The correct answer is A. A promise or statement of future intent is actionable as fraudulent misrepresentation if, at the time the statement was made, the speaker had no intention of keeping the promise. The misrepresentation is not of the future event itself, but of the speaker's current state of mind and intention. Here, the developer falsely represented his present intent to induce the farmer to sell. This is a misrepresentation of a material fact. B states the general rule but misses the critical exception for a promisor's present intent. C is incorrect because the developer's fraudulent statement was the cause of the farmer's agreement to the contract terms. D is incorrect because a tort claim for fraud exists independently of any contract claim and does not require the misrepresentation to be in the contract itself.

Question 14

The 'as is' clause is unconscionable and therefore unenforceable against your client.
The parol evidence rule does not bar evidence of prior fraudulent misrepresentations, even with a merger clause. (correct answer)
The seller's oral statement created an express warranty that cannot be disclaimed by a general 'as is' clause.
There was a mutual mistake of fact regarding the condition of the plumbing, allowing for rescission of the contract.

Question 15

If the buyer sues the salesman for fraudulent misrepresentation, will the buyer likely prevail on the element of scienter? Select one.

Yes, because the salesman made a statement of fact with reckless disregard for its truth or falsity. (correct answer)
No, because the salesman did not have actual knowledge that the car had been in an accident.
No, because the statement was mere puffery that a reasonable buyer would not have relied upon.
Yes, because the salesman was negligent in failing to check the vehicle's history before making a definitive statement.

Question 16

A homeowner, wanting to sell his house, discovered a significant crack in the foundation. Knowing it would be expensive to repair and would deter buyers, he hired a contractor to install drywall and paneling in the basement in a way that completely obscured the crack from view. He did not mention the foundation issue to the real estate agent or in any disclosure documents. A buyer purchased the house after a visual inspection of the finished basement. Two months later, after a heavy rain, the basement flooded, and an expert hired by the buyer discovered the concealed crack was the cause.

The buyer has sued the homeowner for fraudulent misrepresentation. What is the buyer's strongest argument to support his claim? Select one.

The homeowner had a duty to disclose all known defects, and his silence constituted a misrepresentation.
The homeowner's installation of drywall and paneling constituted an affirmative act of concealment equivalent to a false statement. (correct answer)
The homeowner made a fraudulent misrepresentation by failing to correct the buyer's mistaken assumption about the foundation's integrity.
The homeowner is strictly liable for any latent defects that he knew about but were not discoverable by the buyer upon reasonable inspection.

Explanation: The correct answer is B. Fraudulent misrepresentation can occur through affirmative concealment. By taking active steps (hiring a contractor to install drywall and paneling) to hide the crack, the homeowner engaged in conduct intended to prevent the buyer from discovering a material fact. This active concealment is legally equivalent to making a false statement. A is less precise; while a duty to disclose latent defects often exists, the strongest argument here is based on the homeowner's affirmative actions, which constitute a more direct form of fraud than mere nondisclosure. C is incorrect because there is no general duty to correct another's mistaken assumption unless a special relationship exists or the homeowner has already made a statement that created the assumption. D is incorrect because it describes a theory of strict liability, whereas fraudulent misrepresentation requires proof of scienter (intent or knowledge of falsity).

Question 17

A homeowner, while being treated for a serious illness, sold her house. She did not disclose her medical condition to the buyer. The buyer purchased the home, and several months later, a neighbor told him that the homeowner had died from a highly contagious disease inside the house. The buyer was deeply distressed by this information, and the property's market value decreased due to the stigma. The buyer sued the seller's estate for fraudulent nondisclosure.

Will the buyer's claim for fraudulent nondisclosure likely succeed? Select one.

Yes, because the seller's medical condition was a material fact that negatively affected the property's value.
Yes, because the seller had a fiduciary duty to the buyer to disclose all material information.
No, because the seller's personal medical condition is generally not considered a physical defect of the property requiring disclosure. (correct answer)
No, because the buyer's damages are based on emotional distress, which is not recoverable in a misrepresentation action.

Explanation: The correct answer is C. A seller's duty to disclose generally extends to latent physical defects of the property itself (e.g., a leaky roof, bad foundation). It typically does not extend to non-physical or psychological stigmas, such as a death occurring in the house, unless a specific statute (a "stigmatized property" law) requires it. The seller's personal medical condition is not a defect of the property. Therefore, there was no duty to disclose it. A is incorrect because materiality alone does not create a duty to disclose. B is incorrect; a seller and buyer in an arm's-length transaction do not have a fiduciary relationship. D is incorrect because the buyer is also claiming pecuniary loss (decreased market value), which is the standard measure of damages, although recovery is unlikely for other reasons.

Question 18

Your client is a software developer who purchased a specialized computer after the salesperson told her, "This model has a 16-core processor, which you'll need for your work." Your client knew that processor specifications were publicly available on the manufacturer's website and could have easily verified the information with a quick search, but she trusted the salesperson and did not check. The computer actually had only a 12-core processor. Your client's software development is significantly slower as a result, and she has incurred financial losses. The salesperson knew the processor had 12 cores.

In a suit for fraudulent misrepresentation, the defense argues that your client's reliance was not justifiable because she could have easily discovered the truth. What is the most likely ruling on this issue? Select one.

The reliance was unjustifiable, because a plaintiff's contributory negligence is a complete bar to recovery for fraud.
The reliance was unjustifiable, because the plaintiff had an absolute duty to investigate a seller's factual claims.
The reliance was justifiable, because a plaintiff is generally entitled to rely on a defendant's positive, factual assertions. (correct answer)
The reliance was justifiable only if your client can prove the salesperson had a fiduciary duty toward her.

Explanation: The correct answer is C. The modern trend holds that a plaintiff's reliance on a defendant's fraudulent misrepresentation of fact is generally justifiable, even if the plaintiff might have discovered the falsity through an investigation. The law does not want to reward an intentional wrongdoer by allowing them to escape liability because their victim was not sufficiently diligent or was too trusting. The fact that the information was publicly available does not automatically make reliance unjustifiable. A is incorrect because contributory negligence is not a defense to an intentional tort like fraud. B overstates the plaintiff's duty; there is no absolute duty to investigate, especially in the face of a direct factual assertion. D is incorrect because a fiduciary duty is not required for a fraud claim; it can create a duty to disclose, but its absence does not defeat a claim based on an affirmative misrepresentation.

Question 19

A company hired an accounting firm to prepare an audited financial statement for the sole purpose of obtaining a large loan from a specific bank. The accounting firm was negligent in its audit and failed to discover that the company's CFO was embezzling funds, causing the company's assets to be materially overstated. The accounting firm delivered the audited statement to the company. Unbeknownst to the firm, the company also showed the statement to a private investor, who was not mentioned in the engagement letter. Relying on the inflated asset values in the statement, both the bank and the private investor provided funding to the company, which soon went bankrupt.

In a jurisdiction following the majority rule on accountant liability, which party can likely succeed in a claim against the accounting firm for negligent misrepresentation? Select one.

Both the bank and the private investor.
The bank only. (correct answer)
The private investor only.
Neither the bank nor the private investor.

Explanation: The correct answer is B. For negligent misrepresentation, liability to third parties is narrower than for fraudulent misrepresentation. The majority rule (Restatement (Second) of Torts § 552) extends liability not to all foreseeable users, but only to those persons or limited group of persons for whose benefit and guidance the professional intends to supply the information or knows that the recipient intends to supply it. Here, the firm knew the audit was for the specific purpose of securing a loan from the bank. Therefore, the bank is within the scope of liability. The private investor was an unknown and unintended recipient of the information, so the firm owed no duty of care to the investor. A and C are incorrect because the investor was not a party the firm knew would be relying on the report. D is incorrect because the bank was the very party the firm knew would rely on the report.

Question 20

Assuming the dealer is liable for innocent misrepresentation, what is the most likely measure of damages the woman can recover in a tort action? Select one.

$15,000, representing the full value of the book as represented.
$11,000, representing the difference between the value as represented ($ 15,000) and its actual value ($4,000).
$10,000, representing a full refund of the purchase price.
$6,000, representing the difference between the price paid ($ 10,000) and its actual value ($4,000). (correct answer)