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McElrath v. Electric Investment Co

    Brief Fact Summary. The Plaintiff, McElrath (Plaintiff), and the Defendant, Electrical Investment Co. (Defendant), made a contract for the Plaintiff to lease, for a term of years, a summer house the Defendant owned. The Defendant stated that over the next year, an electric railroad would be built to the area near the summer house. No electric rail road was built and the Plaintiff sued.

    Synopsis of Rule of Law. False representations, known to be false, that certain events will occur, if they were designed to induce some action in the hearer, may be the basis for a case of deceit.

    Facts. The Plaintiff sued the Defendant for fraud and deceit based on a statement that the Defendant made during negotiations for a contract to lease a summer house.
    * The Defendant stated that during the next summer, the Minneapolis, St. Paul, Rochester & Debuque Electric Traction Company would build an electric rail road to the area where the summer house was located. They stated that this would make the area a major attraction for the area and the Plaintiffs would turn a profit on renting the summer house.
    * No railroad was built. The Plaintiff sued the Defendant, alleging, they knew no railroad would be built and made the statement to induce the Plaintiff to lease the summer house.

    Issue. Can the statements made by the Defendant, concerning the construction of the railroad be the basis for a case of deceit?

    Held. Yes.
    * The Defendant contends that the statements were statements of future intent, and thus, not the proper basis for a case of deceit. However, if the statements were know by the maker to be false and were said for the purpose of making the Plaintiff enter in to a contract, then they can be held liable for deceit.
    * The statements about the area becoming a major attraction and the profits the Plaintiff could make by subleasing the summer house were mere conjecture and not a basis for an action for deceit.

    Discussion. If a person makes a statements of future plans, knowing that they are false, in order to induce someone to take certain actions, those statements can be the basis for an action for deceit.


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