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Fraudulent Inducement Claims

Updated on April 27, 2011

There are certain different kinds of money rewards available for fraudulent inducement, some of which involves setting aside the contract, also known as rescission that is making the claimant rescind the contract and put both parties back to their original positions. In fraudulent inducement cases, you could also even go for damages and try to be compensated for reliance losses or losses incurred on top of expectation damages. You simply have to prove fraud, although the fraud element may well be rather tricky if you do not give recourse to the misrepresentation act and its helpful fiction of fraud. The controversy surrounding it is of course mainly of academic interest only. The only way to know exactly what you can claim for is of course to hire a lawyer. But before you invest in the hefty fees, think about the events that have happened leading to the fraudulent inducement and try to match it with some of the factors below.

Inducement element has to be proved along certain criteria. To be exact if you wish to commence an action for fraudulent inducement, you would have to show that the fraudulent act or statement had induced you to enter into the contract that is; it had caused you to enter into one. There has to be some measure of causation linking the fraud to the contract. Thankfully for you if you are claiming, the standard of causation to be proved is rather modest and can be easily satisfied.

Before we elaborate on the easy standard, here are some boundary markers to keep in mind that would sever the link of causation for fraudulent inducement. If you had been unaware of the representation than knowing about it after you had made the contract would not help you under this doctrine, you would have to try something else. The same goes for if you had known that the representation made to you was untrue, or if you were totally oblivious or did not care for the representation at all, for example if you were relying on other information or had regarded it as unimportant. However its importance is of course a matter of debate.

The misrepresentation need not be the most important reason to induce the person into the contract, nor the only one. It is more than sufficient if it is one of the reasons for going into the contract, according to Edgington v Fitzmaurice. As a result it does not have to be a ‘but for’ reason nor ‘the’ reason nor ‘the predominant’ reason to enter into the contract. It is also thus irrelevant that the claimant might have entered into the contract anyway even should there have been no misrepresentation. The more material and important this reason is, the easier it is to infer inducement, its presence is a good sign of fraudulent inducement coming about.

It is also irrelevant, according to Redgrave v Hurd that the claimant could have but did not bother to verify the truth of the representations made. It would not in the ordinary course of nature bar the claim, but of course the scope of that has been tempered by a certain expectation of reasonableness insofar as a person could reasonably be expected to make use of an opportunity to discover the accuracy of the representation, or whether it is unreasonable to believe and rely on a representation so absurd. In cases of fraudulent inducement, a defendant is unlikely to have much shelter from this aspect.

Keep in mind one more caveat however that the experience of the claimant would also play a part at times. How experienced and business-minded you are may signal a certain expectation of higher standards on your part and may free up the fraudulent inducement.


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