Question

Lauren. who has no previous experience in the floral business wants to open a floral shop in a downtown business district. Lauren needs funds to purchase inventory and pay six months' rent up front. Lauren approaches a friend of a friend, Jamie, to discuss the possibility of Jamie investing funds and becoming a 25% partner in the business. After a lengthy discussion, Lauren pursuades Jamie to invest based on 1) the excellent location Lauren has picked for the shop, 2) the projected income statement Lauren provided to Jaime and 3) Lauren's description of her prior experience operating a floral business. Eight months later, Jamie learns that the shop's revenues are well below the level Lauren projected while its expenses are significantly higher than projected. Jamie considers suing Lauren for fraud. Which of the following doesn't have to be true for Jaime to prevail in such a lawsuit?

Answer 1

For Jamie to sue successfully for fraud, elements like misrepresentation of material fact and resultant loss must be proven, but Lauren's lack of prior floral business experience does not itself constitute fraud.

Step-by-step explanation:

If Jamie were to sue Lauren for fraud, certain elements would need to be proven for Jamie to prevail in a fraud lawsuit. Specifically, Jamie would need to demonstrate that Lauren made a misrepresentation of a material fact, that Lauren knew the representation was false or made it recklessly without any knowledge of its truth, that Lauren intended to induce Jamie to act on this representation, that Jamie justifiably relied on the representation, and that Jamie suffered a loss as a result of the reliance. However, one element that does not have to be true for Jamie to prevail is that Lauren had prior experience operating a floral business; unless Lauren falsely claimed such experience, her lack of experience does not constitute fraud in itself.