Sometimes, you may enter a contract based on false promises or representations, or a party may accuse you of defrauding them during contract negotiations. A fraudulent inducement claim can involve significant financial matters for parties. You need experienced legal counsel to protect your rights and interests. Turn to the legal team at LaFountain & Wollman P.C.
For over a decade, our firm has helped clients manage challenging business claims. We take the time to discuss your case and your needs and goals, keep you involved at each stage, and prepare a compelling legal case. Our attorneys take a collaborative approach by combining their experiences and backgrounds to prepare compelling arguments to pursue your interests. Contact us today for an initial case review to discuss your rights and options with a knowledgeable business attorney.
Understanding Fraudulent Inducement
Fraudulent inducement occurs when a party uses deceit to trick another party into entering an agreement or contract when that other party would not have done so had they known the full facts. Fraudulent inducement gives the party tricked into entering the agreement the right to seek relief from the courts since using fraud to induce a party to enter a contract means the parties did not have a meeting of the minds necessary to form a valid, enforceable contract.
A party may commit fraudulent inducement when they:
- Make a false representation to a counterparty during contract formation
- Know of the falsity of that representation
- Have an intent to deceive the counterparty into entering the contract
- The counterparty reasonably relies on the false representation when deciding to agree to enter the contract
- The counterparty suffers some form of financial loss due to the fraudulent inducement
Common examples of fraudulent inducement include misrepresenting a property’s value during a real estate transaction, making false claims about a business’s financial stability during merger or investment negotiations, or making false promises about job benefits to induce a person to accept employment.
How Do You Prove Fraudulent Inducement
To prove a claim of fraudulent inducement, you must show that the other party had knowledge of the fraud and intent to defraud you and that you reasonably relied on the other party’s fraudulent representations. Proving a fraudulent inducement claim may require evidence such as:
- Contractual agreements, including draft agreements
- Written communications during contract negotiations, including emails and text messages
- Witness testimony of contractual negotiations, including promises or representations made during negotiation
Potential Remedies in Fraudulent Inducement Claims
A party pursuing a fraudulent inducement claim may seek various remedies from the individual(s) or company that allegedly defrauded them. First, a person may pursue compensation for financial losses they incurred due to the fraud, including for:
- Lost business opportunities
- Replacement costs to secure appropriate goods or services
- Damaged reputation or goodwill
Parties defrauded into entering a contract may also seek rescission to void the agreement and terminate any obligations they have under the contract. A court may void a contract if it finds that a party was defrauded into entering the agreement, refuse to enforce the contract against that party, or order the party responsible for the fraud to pay restitution.
Defending Against Fraudulent Inducement Claims
When someone accuses you of fraudulent inducement, you may have various defenses you can raise to defeat a civil claim and prevent financial liability. Common defense arguments raised in fraudulent inducement cases include:
- Lack of Intent – A fraudulent inducement claim may fail where a defendant did not intend to defraud a party or induce them to enter a contractual agreement.
- Lack of Knowledge of Falsity – A defendant may assert that they did not know of the false nature of a claim or promise when they made it to the other party during contract negotiations.
- Puffery – A fraudulent inducement claim may fail where a defendant can show that an alleged fraudulent claim or promise constituted mere “puffery,” or a sales pitch or marketing tactic that a reasonable person would recognize as not a true representation of a good or service.
- Lack of Reasonable Reliance – A party must prove that they reasonably relied on fraudulent promises or representations to succeed in a fraudulent inducement claim. A defendant may fight a claim by arguing that the plaintiff did not rely on the alleged fraudulent representations to enter the contract or knew enough not to rely on those representations.
- Lack of Damage – A defendant in a fraudulent inducement claim may argue that a plaintiff has failed to present evidence to prove the financial value of the loss they’ve purportedly suffered due to the alleged fraudulent inducement.
- Expiration of the Statute of Limitations – Depending on the specific legal claim that a party asserts in a fraudulent inducement case, the law imposes a deadline on filing a lawsuit in the case based on when the party discovers or should have discovered the alleged fraudulent inducement. When a party waits too long to file suit, a defendant may seek to dismiss the case due to the expiration of the statute of limitations.
How Can a Lawyer Help You with a Fraudulent Inducement Case?
An attorney can help you protect your rights and interests in a fraudulent inducement claim by:
- Thoroughly investigating your case to secure evidence needed to support your arguments
- Evaluating your legal options in the case, explaining your options, and preparing you for what to expect
- Vigorously pursuing a favorable resolution through alternative dispute resolution, if possible, or taking your case to court and trial when necessary to defend your rights and interests
Contact LaFountain & Wollman P.C. Today
If you’ve become the victim of fraudulent inducement or another party has accused you of defrauding them into a contract, you need experienced legal representation to protect your rights and interests. Contact LaFountain & Wollman P.C. for a confidential consultation with an experienced business litigation attorney to discuss your legal options in a fraudulent inducement claim.