The Elements of Fraudulent Inducement of a Contract

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The Elements of Fraudulent Inducement of a Contract

The fraudulent inducement of a contract occurs when someone deceives another party into entering into a contract. It can be made in several different ways — spoken, inferred, by a gesture, or even keeping silent when there is a duty to speak.

There are six elements that must be satisfied in order for fraudulent inducement to apply:

  1. The defendant makes a false representation.
  2. The representation is material to the transaction.
  3. The defendant made the representation either with the knowledge that it was false or with reckless disregard as to the truth.
  4. The defendant made the representation with the intent of inducing the plaintiff to enter into a contract.
  5. The plaintiff reasonably relied on the misrepresentation when entering into the contract.
  6. The defendant’s misrepresentation caused injury to the plaintiff.

Under contract law, fraudulent misrepresentation is one of three forms of misrepresentation. The other two are negligent misrepresentation where the defendant makes a statement without any regard for whether or not it is true and innocent misrepresentation where the defendant had no knowledge that the representation was false.

Defenses for Fraudulent Misrepresentation

Those facing a claim of fraudulent misrepresentation may have several common defenses available to them, including:

Statute of limitations. Arizona law gives plaintiffs three years to sue for fraud, so if the claim was filed after that deadline it may be dismissed.

Lack of evidence. If there is not sufficient proof for any of the six fraud elements listed above, a defendant may not be found liable.

Remedies for Fraudulent Inducement

Remedies for fraudulent inducement include damages and rescission of the contract. Under the election of remedies doctrine, however, the plaintiff must choose to either disavow the contract and seek a return to the status quo ante, or affirm the contract and sue for damages for breach. Otherwise, the plaintiff could repudiate the contract and then sue to get the benefit of the bargain he or she just repudiated.

When you are facing any type of business dispute, you need an experienced Arizona trial attorney to obtain the best possible result. Contact Williams Mestaz, L.L.P., at (602) 256-9400 to speak with us about your case.

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