Didn't we agree earlier that constructive fraud/gross negligence is common law fraud WITHOUT the aspect of scienter? Maybe I am reading too much into it, but the explanation for choice D is tripping me up. I actually got the question right, but I always read the explanations to make sure I understand. If you have insight, let me know!
To prevail in a common law action for innocent misrepresentation, the plaintiff must prove:
a.
The misrepresentations were in writing.
b.
The misrepresentations concerned material facts.
c.
Reliance on the misrepresentations was the only factor inducing the plaintiff to enter into the contract.
d.
The defendant made the false statements with a reckless disregard for the truth.
Explanation
Choice “b” is correct. Innocent misrepresentation may be used as a defense in contract action. It requires proof of the same elements as fraudulent misrepresentation except for intent. Thus, it requires proof of a material misrepresentation of fact, and intent to reduce reliance, actual and justifiable reliance by the contracting party, and damages.
Choice “d” is incorrect. Making a false statement with reckless disregard for its truth is one way to prove scienter, which is a requirement of constructive fraud (fraudulent misrepresentation) rather than innocent misrepresentation.
Choice “a” is incorrect, since the misrepresentation can be made orally or in writing.
Choice “c” is incorrect. There is no requirement that the misrepresentation be the only factor that the plaintiff relied on in entering the contract; it can be one of several factors.
.