Updated November 10, 2020:

Fraudulent inducement Texas is contract fraud of a specific kind; specifically, fraudulent inducement occurs when the defendant has deceived or tricked the plaintiff into doing something to benefit the defendant. Generally, this is the most common form of fraudulent inducement and typically occurs just before the signing of a contract between the involved parties. As such, fraudulent inducement only exists within the context of a contract being in place.

Anytime you are entering into a contractual agreement with another party, use best judgment and due diligence. Simply claiming you did not know what a contract contained is not generally enough to then make a claim of fraud.

Fraud in the Factum

When the defendant in a fraudulent inducement case has lied to the plaintiff about the actual facts within the contract, that is then known as fraud in the factum. Perhaps your employer has made you promises of additional paid time off or promotions if you agree to work longer hours or on days that you otherwise be off, but they fail to deliver on those promises. That would be an example of fraud in the factum.

Elements of Fraud

There are several different elements of fraud to be aware of should you find yourself in a position where you believe you are a victim of such an act. Additionally, knowing what the elements are is important to ensure you do not inadvertently commit fraud.

  • One of the parties made a material misrepresentation
  • The party was aware that a material misrepresentation was being made
  • The material misrepresentation was made with the intent that the other party or parties involved would act upon it
  • The other involved party or parties did, in fact, act upon the material misrepresentation that was made
  • In acting on the material misrepresentation, the party had harm come upon them

So, what is material representation? If a reasonable person would believe it to be important and would act upon it, as such, that is essentially considered material representation.

Intent to Deceive

As previously mentioned, one of the elements that must exist in a case of fraudulent inducement is the intent of one party to deceive another. For this to exist, some evidence must verify that one party was intentionally looking to deceive the other. This can be a third party coming forward or knowledge that makes the wronged party aware that they were being deliberately deceived. However, simply feeling or believing that you were the victim of deception is generally not enough to prove fraud.

Settlement Agreements

Should you be involved with a case regarding fraudulent inducement, and it goes before a judge, there may be a settlement involved, depending upon the judge’s ruling. This would be known as a settlement agreement.

A settlement agreement is a legally binding contract in which obligations may be imposed upon all of the parties involved. For example, if you leave your current place of employment and go to work for a competitor, despite having signed a non-compete agreement, then your employee could potentially sue you for breach of that agreement. But, what if you are still owed money for commissions, unused vacation time, etc., that you have not yet received?

You could, in turn, file a countersuit against your employer. When all is said and done, you and your former employer may enter into a settlement agreement wherein you both agree to let go of the pending litigation and agree to not pursue future action against each other.

Settlement agreements are binding, although some exceptions do exist. For example, as is true with any type of contract or legal document, no party can be, in any way, coerced into signing a settlement agreement. Should there end up being evidence of coercion, it will deem the agreement null and void.

Fraud Versus Breach of Contract

There can sometimes be some confusion as to the difference between fraud and breach of contract. While a breach of contract may exist as an act of fraudulent inducement, they are not one and the same, nor does one have to exist for the other to occur. While fraud is essentially one party deliberately deceiving another party, with harm than befalling that party, a breach of contract essentially exists when one of the involved parties in a contractual agreement fails to uphold their end of the agreement. As such, within the scope of a breach of contract, no ill intent needs to exist.

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