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What is fraudulent inducement?

On Behalf of | Jun 29, 2022 | Real Estate |

What is fraudulent inducement? Fraudulent inducement occurs when one party uses deceptive claims to persuade another party into signing a contract against their best interests. Because fraud violates the requirement of the contract’s “meeting of the minds”, the disadvantaged party has the option to seek damages or terminate the contract.

Fraudulent inducement is a crime since the party being misled may not have agreed to the terms of the contract if the defendant were truthful. If the court finds that the fraudulent inducement claims are valid, the contract will become voidable.

To prove a fraudulent inducement claim, the plaintiff must prove:

  1. There was a material misrepresentation
  2. The misrepresentation was intentional with knowledge of its inaccuracy
  3. The defendant made the misrepresentation with the intention that the plaintiff would rely upon it
  4. The plaintiff relied on the misrepresentation
  5. The reliance upon the misrepresentation caused damage

During a contract negotiation, it is important to watch out for any warning signs. If these signs are ignored, it may affect your claims due to a finding of justifiable reliance. A court may expect a business organization to have specialized knowledge in the field to spot certain red flags but may not expect the same from an ordinary person. A party claiming fraudulent inducement must have exercised “ordinary care to protect its own interests and cannot blindly rely on the defendant’s reputation, representations, or conduct where the plaintiff’s knowledge, experience, and background warrant investigation.”

Damages for fraudulent inducement typically do not include monetary compensation. Instead, they may include other legal remedies to resolve the issue. The court may provide the plaintiff with the option to void the contract. However, if other legal claims arise over the course of the case, the plaintiff may be eligible to sue for monetary damages.

It is important to review the terms of your contract before agreeing to them and collect evidence should there be any issues. If you have any questions regarding the validity of your easement, we invite you to contact us to speak with a board-certified real estate attorney. Our number is 713-572-4900.



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