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This section contains the nature of the case and procedural background.

P and Erstad went shopping for an engagement ring. After looking at diamonds in premier jewelry establishments such as Tiffany and Company and Cartier, they went to D's store, where they found a ring that salesperson Joy said featured a 3.01-carat diamond with a clarity grading of “SI1.” Erstad bought the ring for $43,121.55. The following month, for insurance purposes, D provided Erstad a written appraisal verifying the ring had certain characteristics, including an SI1 clarity rating and an average replacement value of $45,500. Paul Lam, a graduate gemologist with the European Gemological Laboratory (EGL), signed the appraisal. P’s marriage did not last long. In the divorce, P was awarded her personal property, which included the engagement ring given to her by Erstad. P had the ring evaluated by a number of people only to find the true clarity of the diamond and its actual worth, which is-on plaintiff's information and belief-some $23,000 less than what Erstad paid for it. P sued D on several theories. P sued for breach of contract, rescission, recovery under the California Consumers Legal Remedies Act (the Act), and actual and constructive fraud. The fourth cause of action for fraud P alleged D's malicious and deceitful conduct warranted punitive damages. In the fifth cause of action, P sought rescission under Civil Code section 1689 for defendant's alleged fraud in the inducement, mistake, and failure of consideration. D demurred asserting that P had no viable claim because P was neither the purchaser of the ring nor a third-party beneficiary of the contract. The court sustained D’s demurrer without leave to amend. This appeal resulted.

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Legal analysis from Dean's Law Dictionary will be displayed here.