A North Dakota purchase agreement for a residential property in Burleigh County contains the following clause: 'Seller represents that to the best of Seller's knowledge, the mineral rights to the property have not been severed.' After closing, the buyer discovers that the mineral rights were in fact severed by a 1978 deed, and the seller — a long-time local resident — was aware of this severance. The buyer seeks legal remedies. Under North Dakota law, which remedy is most likely available to the buyer?

Correct Answer

C) The buyer may pursue an action for fraudulent misrepresentation and seek damages, rescission, or both, based on the seller's knowing false statement

When a seller makes an affirmative written representation in the purchase agreement that mineral rights have not been severed, and the seller knows this statement to be false, the seller has committed fraudulent misrepresentation. Under North Dakota law, fraudulent misrepresentation in a real estate contract gives the defrauded party the right to pursue multiple remedies: (1) rescission of the contract to restore the parties to their original positions, (2) compensatory damages for the loss in value caused by the misrepresentation, or (3) both rescission and damages in appropriate cases. The seller's actual knowledge of the severance and the affirmative false statement in the contract are key facts that elevate this beyond mere non-disclosure to active fraud.