Is misrepresentation a tort or a breach? I am confused by the provisions in tort and contract law for damages in the case of misrepresentation. I am reading specifically in New York law and it seems unambiguous that the only damages allowed for a claim of negligent misrepresentation are &quot;out-of-pocket losses&quot; which can be zero even when a plaintiff has suffered measurable losses. Consider this scenario: Bob is an excavator. Alice approaches Bob and says that she has buried $1000 in a particular location. They enter a contract for Alice to provide the location of the money, Bob to excavate it, and the parties to split it 50/50. Bob takes his shovel and spends a week digging at the location and to the depth specified by Alice, but finds nothing. Alice says that she honestly believed the money was there, but agrees that Bob performed the excavation properly and that nothing was found. In this case, Bob has a cause of action for &quot;negligent misrepresentation&quot; by Alice. But Bob has no &quot;out-of-pocket damages&quot; because the only thing he spent in performance was his time and labor. (This understanding is detailed here.) It doesn't seem equitable for a tort to be recognized but offer no real remedy. I'm wondering if the problem is that I'm looking at a tort when there is another cause of action under contract law? Contract law appears to offer &quot;benefit of the bargain&quot; as a remedy for breach of contract, and in this scenario it does look like Alice breached the contract ... except that the breach was a negligent misrepresentation. Is there a cause of action for that under contract law even though it's explicitly a cause of action in tort?
What misrepresentation? Alice said she buried the money there. That the money is not there now is not evidence that she didn’t. it’s evidence that something happened to it between then and now. However, let’s not let the flawed example obscure the question. Let’s pretend instead that Alice said the money was there now. Misrepresentation Pre-contractural false statements of fact by one party that induce the other to enter the contract give a cause of action in contract law; they are not a tort. There are torts that are similar like deceit and negligent misstatement. The link provided is talking about fraud - the criminal equivalent of deceit (and the word fraud is often used when technically it’s talking about the tort of deceit). The out-of-pocket rule applies to torts so Bob can recover his losses. Personal time invested is not an out-of-pocket loss as it represents an opportunity cost, so, Bob cannot recover what he or his excavator might have earned instead. He can recover his fuel costs and depreciation on the excavator as those are “real” out of pocket expenses. If Bob had been an employee of a plaintiff company, they could recover his wages but not what they might have sold his time for. That’s just how it is with torts. Misrepresentation is a different beast. It’s a contractural claim so the damages are the “benefit of the bargain”, in this case $500. However, this is only available if the misrepresentation was fraudulent (Alice knew the money wasn’t there), Alice had no reasonable grounds for believing the statement to be true, or at the court’s discretion. Further Bob must prove that it was this statement that caused him to enter the contract and that he would not have entered it otherwise. Alice’s statement may give Bob more than one cause of action and it’s up to him which he chooses to pursue. If he spent less than $500 on fuel he stands to get more with a misrepresentation claim but if his out of pockets are more than $500 he’s better off with a negligent misstatement claim. In either case, these are tough causes to prove.
As the answer by Dale M correctly states, it is a statutory cause of action. To classify it further, it would be a strict-liability tort, I believe, as there need be no proof of damages, and there is no duty of care. Instead there is a duty not to engage in the prohibited action. In this respect the statute approaches the criminal. A more familiar but analogous action would be a suit for copyright infringement where statutory damages are sought. The infringer owes no duty of care, and is bound by no contract. But the law imposes a duty not to infringe. The plaintiff need not allege or prove any actual harm, the fact of infringement of a registered work with a valid copyright is all that s/he need prove. The limits on damages are specified directly in the statute, and the court may award any amount that is within those limits, provided the infringement is proved and no active defense is established. The purpose of the award of damages is to deter future violations as much as to compensate the plaintiff.
What awards can I expect? In what ways would a judge's decisions about awards be legally limited? $500? Interest? Time spent pursuing collections? Filing fee? Anything else? My research so far suggests $500 plus reasonable (less than credit card) interest. Your lawsuit would be for breach of contract, probably filed in California small claims court for this small dollar amount. An award for breach of contract includes: the amount not paid pursuant to the contract, pre-judgment interest from the date that payment was due at the statutory rate in California (the legal rate specified in the contract applies until the contract is superseded by the verdict, but if the prejudgment interest rate is not specified in the contract, the rate is ten percent per annum from the date of the breach, California Civil Code § 3289), post-judgment interest at the statutory rate in California (10% per annum in a contract if not otherwise specified), and out of pocket costs incurred in filing the lawsuit (typically, the filing fee, the service of process fee, postage, copying costs incurred for trial exhibits, and any court fees incurred to collect the judgment if it is entered). Attorney fees are not available unless the contract says so. You are not entitled to any recovery for time spent pursuing collections. Often you have have a collections agency collect it for a percentage of the amount recovered (probably 50% in a claim of this size) plus a small fee, although they might not accept such a small dollar amount debt to collect. The main virtue of this is that it hurts the credit of the person who owes the money, a harm to the non-paying customer that is often far worse than not paying the amount owed on time. Are there any other legal disincentives for this behavior? A well drafted contract can provide for an award of attorney fees incurred in collecting the debt, can set a non-usurious interest rate and late fees for non-payment, and can take steps like requiring a deposit up front, or consenting to service of process by mail, to make collection more likely and to create stronger incentives to pay. Also, if the non-payment rate is low enough and the value of your time doing what you normally get paid to do is high, it may not make economic sense to pursue bad debt which takes some time and some money to get a small potential recovery, as opposed to letting it slide and doing more work that does pay. A small claims lawsuit is probably ten to thirty hours of work for which you will not be compensated even if you win. Depending upon your average hourly rate for your labor, and the percentage of your billings that go uncollected, it may not make economic sense to collect the unpaid bill, or you may want to delegate the job to someone else whose effective hourly rate of labor value is lower. Courts are cost effective places to collect large debts, and can be cost effective if many people owe you money and you can mass produce your collections process (as, for example, credit card companies do). But courts are often not cost effective for collecting one off small dollar amount debts, despite the streamlined process and reduced filing fees that are available in small claims court. if only a fraction of contractors seek justice, and the award never exceeds the originally agreed upon amount, then the rational decision would seem to be, don't pay the contractor. Consumers are not purely rational actors on a transaction by transaction basis in these matters. The vast majority of the time, people pay as agreed even though they could get away with paying less by forcing the person who did business with them to sue them to get paid. On a case by case basis, this is often not rational, but as a long term strategy for all transactions that a consumer enters into, it often does make rational sense. In small dollar transactions, blacklisting people from future business and harming their credit records is usually enough of an incentive to make uncollectible invoices an acceptable cost of doing business. But a good business person does evaluate every customer to whom trade credit is extended for creditworthiness if the customer does not pay in advance. On the other hand, as a business person, you may have a strategic interest in pursuing every unpaid invoice even if it isn't cost effective to do so when considering that unpaid invoice in isolation, in order to instill in your customers the knowledge that when you say you will sue them if you aren't paid, that you are making a credible threat. This may discourage people from not paying you in the first place.
The question does not say what reasons the other party gives for not paying, and so one cannot judge whether such reason is covered by the terms quoted in the question. In general a contract need not be highly specific if the intent is clear. However, any ambiguity will usually be resolved against the party who wrote the contract, so it is in that party's interest to be as clear and specific as possible. It is not clear from the quoted terms that they form a contract at all. No consideration is stated. Contractual provisions which deny all recourse are not always enforceable. They may be overruled by law or regulation, or by prior court decision or by an equitable decision. If there is a serious problem with the service provided, particularly in a consumer transaction, a court might reject a provision denying all refunds even if it is quite specific and clear. The question does not list the jurisdiction (country and, for federal countries, state or province). Laws on contracts and enforceable terms vary significantly in different jurisdictions. Without this a specific answer is not possible.
In contract law in the United States, this is a "liquidated damages" clause. It provides that when one side breaches the contract, it has to pay a certain amount of money to make up for it. Normally this is done where it is difficult to calculate the actual damages in the event of a breach, or where the parties would rather avoid calculating the actual damages--a common example is where you put in an earnest money deposit on a house and then forfeit the earnest money if you do not buy. However, there are restrictions on what kind of damages are permitted. Notably, a "penalty" usually refers to an unreasonable amount that is unenforceable as against public policy. It would ordinarily be unreasonable to make someone pay a hundred million dollar penalty for breaking a ten thousand dollar contract, for example. Liquidated damages clauses frequently say "this is not a penalty" and "the parties agree this is reasonable" to make it harder to invalidate them on public policy grounds. Instead, if the liquidated damage payment is a payment meant to reflect actual damages that are just hard to calculate, it is much more likely to be enforceable. You would need to research liquidated damages and penalties in the state whose law governs the contract to determine whether the particular clause is permissible under state law. See https://www.google.com/search?q=restatement+of+contracts+penalty&amp;ie=utf-8&amp;oe=utf-8
Does Bob have a case/standing? Yes, this is a reasonably straightforward contract dispute. Once you contract to do something and you then don't do it, you are liable for damages. Contractual damages are assessed on an expectation basis - the innocent party is entitled to be placed financially in the same position as though the contract had been completed without the breach. Bob is entitled to have the item and not to be out-of-pocket more than he agreed to pay. But ... There may not be a contract - see What is a contract and what is required for them to be valid? A contract is formed when the parties reach an agreement and most website terms and conditions are clear that this is NOT when the customer pays for it. For example, Amazon says: The Order Confirmation E-mail is acknowledgement that we have received your order, and does not confirm acceptance of your offer to buy the product(s) ordered. We only accept your offer, and conclude the contract of sale for a product ordered by you, when we dispatch the product to you and send e-mail confirmation to you that we've dispatched the product to you (the &quot;Dispatch Confirmation E-mail&quot;). So, here, two things have to happen before Amazon and you have a contract: they have to physically dispatch the goods and they have to send you an email saying they have. If they do one without the other, there is no contract. If your vendor has similar terms, you don't have a contract with them and are not entitled to contractual damages. You would not have a case in equity because they were clear that there was no contract until these things happened. You might be able to argue negligence if they sent the email without dispatching the goods but your damage basis would be different. Tort damage is calculated on a restoration basis, not an expectation basis, so you can recoup your losses but not claim any lost profits. It makes no difference here but if you had had a buyer who was going to pay you twice the price you paid, in contract you are entitled to the lost profit, in tort, you aren't. However, if the contract has a dispute resolution clause, that would normally have to be complied with before you can go to court. In some cases, this may prevent going to court at all, for example, if the dispute resolution clause included binding arbitration or expert determination. If there is a choice of law clause then this will usually be binding, however, if this is a consumer contract in New Zealand then NZ consumer law will apply in addition. Similarly, courts will usually observe a choice of venue clause. With what reasonable time lapse between (false) shipment notification of the original order and placing the eBay order? A reasonable time. Depends on what the product is and what normal delivery times are. For a 5mm screw, a reasonable time is probably measured in months. For an aircraft carrier it's probably measured in decades. Does this sort of a claim fall under the jurisdiction of small claims court (given that the amount is less than the threshold)? Neither New Zealand nor England &amp; Wales (bearing in mind Scotland and Northern Ireland are different jurisdictions) have small claims courts. The correct venue in New Zealand is the Disputes Tribunal which is not a court, and in England and Wales it is the County Court. Procedurally, would it be more advantageous for Bob to file the claim in the UK or in New Zealand? Ask a lawyer in each jurisdiction. Now Bob wants to claim damages from the store in the amount &quot;Total for the eBay order less total for the original store order&quot; — on top of full refund of the original order. Bob is not entitled to a refund. He is entitled to damages. A more accurate way to state the damages is the total for the eBay order and to not make any mention of a refund.
I love Wikipedia to bits, but it's sometimes worth reading the &quot;talk&quot; pages as well as the article, and trying a few other sources. I think this one comes closer : Damages attempt to measure in financial terms the extent of harm a plaintiff has suffered because of a defendant's actions. In the paragraph you're translating, &quot;damages&quot; is used as a broad term : the text then goes on to mention &quot;losses, liabilities, claims, injuries, lawsuits, costs and expenses&quot; as specific forms of damages. &quot;Damages&quot; as highlighted in the translation is the word I would use, as it covers many different things with a financial effect on the plaintiff. &quot;Losses&quot; is more specific, and is already covered in the list that follows. Losses may be considered damages, but not all damages are losses.
No An LLC that didn’t exist at the time of the act or omission that caused the loss being sued over is not a valid defendant. They would sue you personally and all of your assets, including the LLC, would be available to the creditor.