Fraud in the Inducement Lawyers

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What Is Fraud in the Inducement?

Fraud in the inducement is a specific type of contract fraud. In these cases, the defendant uses deceit or trickery to cause the other party to act to their advantage.
Fraud in the inducement means two things:

Fraud in the inducement is often contrasted with another type of contract fraud called “fraud in the factum”. Fraud in the factum is where the defendant deceives the plaintiff about the subject matter of the contract.

In contrast, fraud in the inducement has more to do with the surrounding circumstances that cause the plaintiff to act. Fraud in the inducement is sometimes called “fraud in the procurement” or “fraudulent inducement.”

What Is an Example of Fraud in the Inducement and Fraud in the Factum?

Fraud in the Inducement: Suppose that the defendant stated, “I am a licensed real estate agent, please sign this contract”. In reality, the defendant is not a licensed agent. The plaintiff signs the contract because they believe that the defendant is a professional. This would be considered fraud in the inducement. The plaintiff was “induced” to sign the contract because he relied on the facts surrounding the contract.

Fraud in the Factum: Now suppose that the defendant had stated, “Please sign this contract for the sale of 30 toys”. In reality, the contract is for the sale of 50 toys. The plaintiff proceeds to sign it because they believe they will only be paying for 30 items. This would likely be considered fraud in the factum. The fraud has to do with the material subject matter of the contract.

What Are the Effects of a Fraud in the Inducement?

Fraud in the inducement is considered a serious violation. The court will declare a contract that is tainted by fraud in the inducement voidable. “Voidable” means that the innocent party can have the contract voided by the court.

Thus, the plaintiff will not need to perform their contract duties if the court voids the contract. This is true even if the plaintiff signed the contract, since they were caused to do so in a fraudulent manner. Monetary damage awards may not be available as a contract remedy for fraud in the inducement.

Are There Any Defenses to Claims of Fraud in the Inducement?

A common defense to fraud in the inducement is “unreasonable reliance on an oral agreement.” This means, if the plaintiff was unreasonable in relying on the defendant’s representations, it could serve as a defense.

For example, suppose the defendant made an oral promise that was clearly in contradiction to a written promise. A court might find it unreasonable that the plaintiff relied on the oral promise. This of course may vary in each situation and in each jurisdiction.

Another defense to fraud in the inducement is that the misleading statement was not intentional. In most cases, the defendant must have intended to mislead the plaintiff in order for a violation to be found.

Should I Get a Lawyer to Help Me with a Fraud in the Inducement Claim?

Yes. Claims involving fraud in the inducement can often be quite complex. Proving fraud in the inducement requires a strict analysis of all the facts surrounding the contract agreement. If you believe that you have legal issues involving fraud in the inducement, you may need to hire a lawyer for advice. An experienced business attorney can represent your interests according to the laws in your area.

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Last Modified: 05-19-2015 04:08 PM PDT

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