R2d § 164
When a Misrepresentation Makes a Contract Voidable
(1) If a party's manifestation of assent is induced by either a fraudulent or a material misrepresentation by the other party upon which the recipient is justified in relying, the contract is voidable by the recipient. (2) If a party's manifestation of assent is induced by either a fraudulent or a material misrepresentation by one who is not a party to the transaction upon which the recipient is justified in relying, the contract is voidable by the recipient, unless the other party to the transaction in good faith and without reason to know of the misrepresentation either gives value or relies materially on the transaction.
Professor's notes
Elements: (1) if a party's manifestation of assent is induced by either a FRAUDULENT or a MATERIAL misrepresentation by the other party upon which the recipient is justified in relying, the contract is voidable by the recipient.
Note the disjunction: fraudulent (any) OR material (need not be fraudulent). Justifiable reliance is the gating element.
Hill v. Jones (termite infestation) operationalizes: material misrepresentation by silence where disclosure was required.
Barrer v. Women's National Bank shows bank's duress/misrepresentation context.
Common misunderstanding: students think misrepresentation requires affirmative lying. § 161 makes silence equivalent to assertion in defined circumstances: concealment, partial disclosure, fiduciary relation, mistake of basic assumption. The duty to disclose is the modern frontier; Hill v. Jones shows it in residential real estate.
Cases that operationalize this rule
Text
R2d § 164. When a Misrepresentation Makes a Contract Voidable.
(1) If a party’s manifestation of assent is induced by either a fraudulent or a material misrepresentation by the other party upon which the recipient is justified in relying, the contract is voidable by the recipient.
(2) If a party’s manifestation of assent is induced by either a fraudulent or a material misrepresentation by one who is not a party to the transaction upon which the recipient is justified in relying, the contract is voidable by the recipient, unless the other party to the transaction in good faith and without reason to know of the misrepresentation either gives value or relies materially on the transaction.