Contract fraud occurs when one party in a contract presents information to another that is incorrect, deceitful, or meant to confuse the other party. For example, contract fraud may be found when an individual claims that a contract is for the sale of a car, when in fact the terms of the contract specify that it is for the sale of boat.

There are two main types of contract fraud:

  • Fraud in the Inducement: This is where the fraud exists with regards to the entire contract; the person is deceived into signing due to the fraudulent circumstances (for instance, they sign because they though the person was a real estate agent, when in fact they weren’t).
  • Fraud in the Factum: This is where the fraud exists as to a certain fact or description contained within the contract. For instance, if one party signs because they thought they would be purchasing 50 items, when in fact the person intends to sell them 100 items.

In order to prove fraud, it must be shown that: 1) one party knowingly misrepresented a material fact 2) with the intent to deceive or defraud the other party. Also, the other party must have relied upon the misrepresentation, and the misrepresentation must cause them actual loss.

What Are Some Remedies for Contract Fraud?

One main remedy for a contract of fraud is an award of monetary damages. This will help to reimburse the non-breaching party for the losses directly caused by the misrepresentation. For instance, if the plaintiff spent money on a fraudulent contract purchase, the damages award will reimburse him or her for the money that they spent.

If a monetary award would not adequately account for the harm suffered by the non-breaching party, then an injunction would be the proper remedy.

Are There Any Defenses to Contract Fraud?

One defense to contract fraud is known as "unclean hands".  That is, one party cannot sue the other if they have unclean hands, meaning that they have engaged in the same type of violation as the breaching party. Here, in the context of fraud, this means that one party cannot sue another for fraud if they themselves have also engaged in fraud.

Do I Need a Lawyer for Help With Contract Fraud Issues?

Contract fraud can often be a somewhat complicated area of contract law. You may need to hire a qualified business lawyer if you have any legal issues or disputes that involve contract fraud. Your attorney can assist you in court during the actual hearings, and can also provide you with the legal advice that is necessary for succeeding on your claim.