Skip to main content

Search

Unfair and Deceptive Acts and Practices: 4.2.15.3.6 Must the seller have an independent duty of disclosure?

A few courts have held that a failure to disclose is a UDAP violation only if the defendant had a duty to disclose the information.386 A duty to disclose may arise from a fiduciary relationship, from partial disclosure, or from superior knowledge.387 Better-reasoned decisions do not require any independent duty of disclosure, but hold it a UDAP violation for a seller to fail to disclose material facts that are not reasonably discoverable by the buyer.388

Unfair and Deceptive Acts and Practices: 4.2.15.3.7 Must the consumer investigate?

A substantial body of decisions holds that a UDAP claim is not affected by the consumer’s negligence or lack of due care.389 Any other holding would be inconsistent with the purpose of UDAP statutes to protect vulnerable, unsophisticated consumers.390 Nevertheless, a Georgia court has taken the remarkable position that where information is concealed, making the scope of insurance coverage ambiguous, it is the consumer’s responsibility to inquire as to what coverage is being offered and

Unfair and Deceptive Acts and Practices: 4.2.16.1 Subsequent Disclosures Cannot Correct Earlier Deceptive Claims

A practice is deceptive even if subsequently clarified.501 Point of sale disclosure is not sufficient to clarify deceptive media advertising.502 Many courts recognize that the deception need only be a substantial factor, not the sole cause of the consumer’s loss.503 It is deceptive to place statements in a product’s instruction manual at variance with advertising claims.504 Small print cannot save a m

Unfair and Deceptive Acts and Practices: 4.2.16.2 Subsequent Consumer Conduct or Other Occurrence Cannot Cure Deception

Signing another document after the deception is apparent does not waive the consumer’s right to sue for a UDAP violation.515 When a consumer leased a used car represented as new, discovered that the car was used, but still purchased it at the end of the lease term, they did not waive their right to bring a UDAP action for the original deception.516 Similarly, when a car proved not to be as represented, and the consumer first revoked acceptance, but then reaccepted the car and continued to use it

Unfair and Deceptive Acts and Practices: 4.2.16.3 The Georgia Exception

Several Georgia decisions adopt a position at variance with other jurisdictions and at variance with established FTC precedent.523 They find that contract terms that clearly state certain aspects of a transaction cure prior oral misrepresentations about those aspects of the transaction. The consumer has the responsibility to read the contract and ferret out inconsistencies in the seller’s oral statements.

Unfair and Deceptive Acts and Practices: 4.2.18 Deceptive Statements Need Not Be Advertised to the Public

There is no merit to the argument occasionally made by sellers that UDAP statutes apply only to media advertising, and that oral representations not preceded by media advertising are not actionable.537 A few UDAP statutes or substantive prohibitions are limited to advertisements, but this term is usually defined broadly.538 A company’s securities filings, proxy statements, and public statements can be advertisements, subject to Minnesota’s False Statements in Advertisement Act, as long as they a

Unfair and Deceptive Acts and Practices: 4.2.20.1 Deception Is Not Based on Breach of Contract

UDAP statutes are broader than contract or tort law and dispense with many of the elements of those claims.552 A UDAP claim is not based on the contract, but on oral and other misrepresentations.553 Consequently, deception can be found where there is no breach of contract or warranty.554 For the same reason, as detailed in the following sections, contract and common law defenses generally do not apply to UDAP claims.

Unfair and Deceptive Acts and Practices: 4.2.20.2 Parol Evidence Rule

The parol evidence rule, which generally prohibits the introduction of oral or written representations extrinsic to a contract to vary, add to, or contradict the terms of the contract, does not apply to UDAP claims.555 Any other interpretation would be, in effect, a ruling that the written contract operated as a waiver of the protections of the UDAP statute, which would be contrary to public policy.556 In a UDAP case, the representations are not introduced to vary or contradict the terms of the

Unfair and Deceptive Acts and Practices: 7.3.10 Yo-Yo (Spot Delivery) Abuses

Yo-yo transactions and related consumer claims are described in more detail in NCLC’s Automobile Fraud.292 In a yo-yo transaction, the consumer believes the sale and financing are final. But the dealer later tells the consumer to return the car, ostensibly because financing has fallen through. If the consumer does not return the vehicle or agree to rewrite the transaction on less favorable terms, the dealer repossesses the vehicle, and in some extreme cases has the consumer arrested or threatens to do so.

Unfair and Deceptive Acts and Practices: 4.2.20.5 Voluntary Payment Doctrine

Under the common law doctrine of voluntary payment, money paid with full knowledge of the facts generally cannot be recovered, even if the demand was unlawful.618 In theory, the rule ensures that a party with a legal claim asserts it at the first opportunity, before making payment, thereby allowing the other party to respond or adjust its position accordingly.619 Historically, the doctrine has been applied where the parties involved were more or less on equal terms.

Unfair and Deceptive Acts and Practices: 4.2.20.6 Post-Transaction Waivers

Signing another document after the deception is apparent does not waive the consumer’s right to sue for a UDAP violation.647 Conditioning something to which the consumer is entitled upon signing a waiver that contains false statements may be a UDAP violation in and of itself.648 Where the UDAP statute lists defenses and does not include accord and satisfaction as a defense, courts may hold that it is unavailable.649

Unfair and Deceptive Acts and Practices: 4.2.21.3 Unclean Hands

That the consumer has unclean hands is not a defense to a UDAP action.680 A policyholder’s false answers in an insurance application do not create a defense to a UDAP claim based on the agent’s own misrepresentations, even if they would create a defense to a contract claim.681

Unfair and Deceptive Acts and Practices: 4.2.21.4 Other Tort Defenses

It is irrelevant to a UDAP claim that a party to an at-will contract does not incur tort liability by terminating the contract.684 Some courts hold that Pennsylvania’s “gist of the action” doctrine, which bars tort claims that arise from a contract, is inapplicable to UDAP claims.685 Others hold that the doctrine bars UDAP claims, but only if they arise out of the parties’ contract.686

Unfair and Deceptive Acts and Practices: 4.3.2.1 Standard Enacted by Congress in 1994

The FTC’s 1994 Reauthorization Act defines the unfair practices that the FTC can declare unlawful as one that (1) causes or is likely to cause substantial injury to consumers, (2) which is not reasonably avoidable by consumers themselves, and (3) not outweighed by countervailing benefits to consumers or to competition. The Act reads:

Unfair and Deceptive Acts and Practices: 4.3.2.3.3 The relevance of the doctrine of unconscionability

The doctrine of unconscionability is well established and there is a large body of decisions interpreting it.745 This wealth of case law may be helpful in interpreting the definition of unfairness. In particular, since one of the key elements of unconscionability under the UCC is the lack of meaningful choice,746 unconscionability decisions are relevant to the question whether an injury is reasonably avoidable.