Legal Definitions - sciendum est

Scienter is a legal term that refers to a person's mental state, specifically their knowledge or intent, when performing an action. It is crucial in determining legal responsibility because it signifies that an individual acted with awareness of the potential consequences or with a deliberate purpose to cause harm or deceive.

There are two primary ways scienter is understood in law:

• Knowledge of wrongdoing or risk: This refers to a situation where a person knows their actions are wrong, dangerous, or likely to cause harm, and proceeds anyway. This knowledge makes them legally responsible for the resulting damage or injury.
• Intent to deceive or defraud: This applies when a person deliberately intends to mislead, manipulate, or cheat another party. This specific intent is often a key element in proving fraud, particularly in financial or securities cases.

Here are some examples illustrating the concept of scienter:

• Example 1 (Knowledge of Risk): Imagine a property owner who receives multiple warnings from city inspectors about a dangerously unstable retaining wall on their land. Despite these warnings and knowing the wall could collapse, the owner takes no action to repair or replace it. When the wall eventually collapses and damages a neighbor's property, the owner could be found liable because they acted with scienter. They had clear knowledge of the dangerous condition and the potential for harm but chose to ignore it, making them legally responsible for the resulting damage.

• Example 2 (Intent to Deceive in Business): Consider a software company executive who, to boost the company's stock price, knowingly makes false public statements about a new product's capabilities and market readiness. The executive understands these statements are untrue but intends for investors to believe them and purchase shares. When the truth is revealed and investors lose money, the executive's actions demonstrate scienter. Their deliberate intent to mislead investors for financial gain is a key element in proving securities fraud.

• Example 3 (Knowledge in Criminal Context): A person buys a valuable antique from an individual they know to be a notorious thief, despite being offered the item at an unusually low price and without any proof of ownership. Later, it is confirmed the antique was stolen. The buyer could be charged with receiving stolen property because they acted with scienter. Their awareness or strong suspicion that the item was stolen, combined with their decision to purchase it, establishes the necessary mental state for criminal liability.