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Official Blog of the AALS Section on Contracts

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Arkansas_flag A plaintiff who pleaded fraud and deceptive trade practices arising out of a Ford Explorer SUV that rolled over found himself tossed out, because he should have proceeded on a contract theory, according to a recent decision by the Arkansas Supreme Court.

In the case, Buddy Wallis had bought a Ford Explorer, a vehicle that subsequently developed a reputation for rolling over.  Wallis’s Explorer didn’t roll, but he brought a class action anyway, claiming that the SUV’s propensity for rolling had led to a diminution in its value.  Ford moved to dismiss, arguing that he had suffered no cognizable injury from the alleged fraud since his vehicle worked just fine.  The trial court dismissed the action.

The supreme court began by noting that in a common-law fraud action, one measure of damages is the benefit of the bargain.  In an automobile case, that ordinarily means the difference between the value of the vehicle as represented and the actual value of the vehicle.  But the court drew a sharp distinction between so-called “contract” cases (where the claim is that the vehicle wasn’t what was promised) and so-called “products liability” cases (where the claim essentially is that the product is defective).  In the former case, the “benefit of the bargain” is a proper measure of fraud damages, but in the latter it is not, unless the defect has resulted in some actual damage.

Since Wallis did not plead diminution of value for breach of contract, and had suffered no injury as a result of the defect, he lost both his fraud and his deceptive trade practices claims.

Wallis v. Ford Motor Co., 2005 Ark. LEXIS 301 (May 12, 2005).

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