TortsProf Blog

Editor: Christopher J. Robinette
Southwestern Law School

Friday, December 2, 2022

CA: Claims for Fradulent Inducement Not Barred by Economic Loss Rule; Cites R3 Economic Harm

From the ALI website:

In Dhital v. Nissan North America, Inc., 2022 WL 14772909 (Cal. Ct. App. Oct. 26, 2022), the California Court of Appeal held that claims for fraudulent inducement were not barred by the economic-loss rule as defined by Restatement of the Law Third, Torts: Liability for Economic Harm § 3. The case was brought by consumers who alleged that they purchased a vehicle with a defective transmission system from the defendant manufacturer, and that the defendant, “by fraudulently concealing the defects, induced them to purchase the car.”

The court explained that the plaintiffs’ claim for fraudulent inducement fell within an exception to the economic-loss rule because the defendant’s fraudulent inducement violated a duty that was “independent of [its] alleged warranty breaches.” Citing § 9 of the Restatement, it observed that the expectation of honesty during negotiation of the purchase contract called for remedies not customarily available from the law of contract or restitution, because “parties to a contract generally [did] not treat the possibility that they [lied] to each other as a risk for the contract to allocate.”

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