The Consumer Fraud Act (CFA), NJSA 56:8-1 et seq. is a very powerful law which benefits all consumers both what you normally would consider a consumer as well as businesses. Generally, a consumer is defined as any person including businesses that purchase products for their own use. This would not include a person or business that purchases products to incorporate into their own products. The act also does not cover businesses that buy objects for resale. One of the things that makes this law very powerful is that if it is violated the violator is subject to triple damages plus attorney fees. While it is a very powerful act that has over thirty years of history, it may not have caught up to time and technology. The CFA prohibits:
the act, use or employment by any person of any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing, concealment suppression, or omission of any material fact, with intent that others rely upon such concealment, suppression or omission, a connection with a sale or advertisement of any merchandise or real estate, or with the subsequent performance of such person as aforesaid, whether or not any person has in fact been mislead, deceived or damaged thereby, is declared to be an unlawful practice. NJSA 56:8-2.
I highlighted the phrase “any person” because this is where the difficulty of the act may arise. Any person means just that. It means you, it means me, it means the mom & pop store down the road; and it means the national retail chain. The act’s requirements do not differentiate between a person and a large corporation but applies equally to all.
The CFA clearly applies to the computer store that sells, as its business, hardware and software. It applies to the national retail clothing store. It applies to the new and used car dealers. The question is whether does the CFA apply to the sale of an isolated item through an advertisement to another party. Under the plain meaning of the definition of “any person” a person who makes an affirmative misstatement of fact is liable under the CFA. The currently is a case before the NJ Supreme Court, Real v. Radir Wheels, Inc., which may determine if there is a threshold number of items a person has to sell before they become liable under the CFA.
In Real v. Radir Wheels, the owner of Radir Wheels sold a 1970 Corvette on eBay. In the eBay listing the seller noted the car had a good frame and runs strong among other descriptions. None of these turned out to be true, as the frame was rusted, and the engine was in poor condition. In fact the car could not have been registered to operate on the road in the condition it was in. Testimony during the trial revealed that the seller’s hobby was to buy old vehicles and restore them. In fact the same month that he sold the corvette he sold two other vehicles. The trial court had no trouble finding that the Seller was subject to the CFA and had violated the statute in addition to common law fraud. The appellate division reversed and the appeal was taken to the NJ Supreme Court.
The Supreme Court heard oral arguments on January 21st. Oral argument showed that the Justices were concerned that a plain reading of the statute would subject everyone who ever says an item on eBay, classifieds ad or otherwise could come under the liability of the CFA. The Supreme Court will be deciding whether to hold everybody that makes a misstatement in an ad to treble damages and attorneys fee; or whether there is some threshold activity a seller must reach before the CFA protection against unconscionable commercial practices.
One of the keys to understanding the ultimate decision from the Supreme Court, the seller made affirmative statements on the condition of the product. Under the CFA if a person make statements and those statements turn out to be false there is a violation of the CFA. The Seller does not need to know the statements are false when made only that the statements are false. Therefore even if the Seller in Real did not know there was rust on the frame, his statement that it had a good frame was false and would subject him to the CFA.
The moral of the story may be that if you are going to be selling items online or in the newspaper make sure what is posted in that listing is accurate. If you are unsure or cannot verify the information even if you think it to be true, it would be better not to post the information.