Legal Definitions - injurious falsehood

Injurious falsehood is a legal term referring to a false statement made about someone's property, products, or business that causes them financial harm. Unlike defamation, which harms a person's reputation, injurious falsehood specifically targets their economic interests.

To prove injurious falsehood, several elements must generally be present:

• A false statement was made.
• The statement was made about the plaintiff's property, goods, or business.
• The person making the statement acted with malice, meaning they knew the statement was false or acted with reckless disregard for its truth, and intended to cause harm or knew it was likely to cause harm.
• The statement was published to a third party.
• The false statement caused the plaintiff to suffer actual financial loss.

Here are some examples to illustrate this concept:

• Example 1: Property Sale

  Imagine a real estate agent, out of spite, tells a potential buyer that a house listed by a competing agent has severe, undisclosed mold issues and a faulty foundation, even though these claims are completely untrue. The potential buyer, believing the false information, withdraws their offer, and the house remains on the market for an extended period, eventually selling for a lower price than initially offered. The competing agent and the homeowner could potentially sue for injurious falsehood.

  This illustrates injurious falsehood because: A false statement was made about a specific property (the house). The agent made the statement maliciously (out of spite, knowing it was false). The statement was published to a third party (the potential buyer) and directly caused financial loss to the homeowner (lower sale price, delayed sale).

• Example 2: Product Disparagement

  A competitor of a popular organic food company starts spreading rumors online, falsely claiming that the company's new line of baby food contains artificial preservatives and harmful chemicals, despite the company's strict organic certification. As a result, several major retailers cancel their orders, and consumer trust in the brand plummets, leading to a significant drop in sales.

  This illustrates injurious falsehood because: False statements were made about the quality and ingredients of the organic food company's products. The competitor acted maliciously by spreading known falsehoods to damage the company's business. These statements were published online (to third parties) and directly resulted in substantial financial losses for the organic food company through canceled orders and reduced sales.

• Example 3: Business Service

  A disgruntled former employee of a small IT consulting firm creates a fake social media profile and posts numerous false reviews, claiming the firm's cybersecurity services are incompetent and have led to client data breaches, even though no such incidents occurred. Several prospective clients, after reading these reviews, decide to take their business elsewhere, causing the IT firm to lose out on lucrative contracts.

  This illustrates injurious falsehood because: False statements were made about the quality and reliability of the IT consulting firm's business services. The former employee acted maliciously by intentionally fabricating negative reviews. These statements were published on social media (to third parties) and directly caused the IT firm to suffer financial loss by losing potential clients and contracts.