Fraudulent inducement is a legal claim that is made when one person has been defrauded into entering into a contract with another party. 3 min read
Fraudulent inducement is a legal claim that is made when one person has been defrauded into entering into a contract with another party. In order to establish such a claim, the victim must prove the following:
1.The other party made a fraudulent misrepresentation of the facts
2.The misrepresentation must be material to the transaction occurring between the parties
3.The perpetrator of the fraud must know that the misrepresentation was false
4.The perpetrator made the misrepresentation with the intent to persuade the victim into agreeing to the contract or transaction
5.The victim relied on the misrepresentation
6.The victim wouldn’t have agreed to engage in the transaction or contract if he or she would have known the truth
Note that if the victim knew the statement was false when it was being made by the other party, then that wouldn’t constitute a claim for fraudulent inducement. Furthermore, the victim must have relied on it in making his or her decision. Mere statements of opinion made by another party don’t constitute fraud. Therefore, if the other party made a statement of opinion to the victim, and expressly indicated that it was a mere opinion, the victim cannot make a claim for fraudulent inducement, even if the victim relied on the opinion.
Difficulty in Proving Fraudulent Inducement
Keep in mind that fraudulent inducement occurs before the parties have signed the contract. Proof of the fraud will allow the victim party to rescind the transaction or seek monetary damages as a result of the fraud.
With that said, there can be difficulty in proving this type of fraud for several reasons:
1.The statement made by the perpetrator must be factual and not an opinion
2.The reliance must be justified
3.If the statement made by the perpetrator contradicts what is identified in the subsequent contract, then a claim for fraudulent inducement cannot be made
4.The victim must have records proving the fraud
The statement itself must be one of fact, and not opinion. Therefore, when it comes to fraudulent inducement claims, the perpetrator can argue that the statement made was one of opinion and not of fact, and therefore, the victim has no claim.
Furthermore, the reliance on the part of the victim must be justified. How is it justified? The court will look at the surrounding circumstances to identify whether or not reliance was in fact justified. For example, if the perpetrator makes some sort of claim that a reasonable person wouldn’t believe or rely on, then a claim for fraudulent inducement will likely not be met.
Even if a fraudulent misrepresentation is made verbally to the victim, it might not constitute a claim for fraudulent inducement if a subsequent contract or agreement contradicts the verbal misrepresentation. Therefore, the victim should understand that any verbal statements made will be outweighed by the actual written contract or agreement, particularly if it contradicts the verbal statement previously made by the perpetrator.
When a victim brings a fraudulent inducement claim in court, he or she must provide sufficient records proving the fraud. Therefore, the fraudulent misrepresentation is usually one that must be made in writing, whether it be in a contract or in an e-mail. Without such proof, it will be very difficult to bring this type of claim.
Fraudulent Inducement in New York
In the State of New York, before you can bring this type of claim, the state has certain requirements; if such requirements aren’t met, then the court will simply dismiss the action from the very beginning. Such requirements include the aforementioned factors, along with reliance to their detriment on the perpetrator’s representation. This could even be proven by showing that the parties had a close relationship with one another. This type of claim is very similar to a breach of fiduciary duty, as both claims involve the victim claiming that they relied on the misrepresentation.
These types of claims arise in employment contracts. For example, an employee might leave her current position for a new company, believing that the new company would have more to offer due to the new company’s representations indicating that the employee would be given a certain title and be doing certain work. However, once she begins her new job, she finds out that the job is entirely different than what the new company represented to her.
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