Breach of Contract and Fraudulent Inducement Claims: Two Bites at the Apple?
Complaints often assert a breach of contract cause of action that is framed by a fraudulent inducement cause of action. The purpose of this piece is to point out the difficulties presented when the practitioner attempts to plead both claims concurrently.
January 13, 2020 at 11:45 AM
10 minute read
Lawyers who draft complaints often have the habit of expanding their requested legal claims or causes of action into areas that do not have the remotest chance of overcoming a motion to dismiss. Often these same lawyers think that the heft of their papers will prove daunting and intimidating to the adversary and perhaps even the court. Examples of this are often seen in complaints asserting a breach of contract cause of action that is framed by a fraudulent inducement cause of action. The purpose of this piece is to point out the difficulties presented when the practitioner attempts to plead both claims concurrently.
Under longstanding New York law, a plaintiff cannot establish a claim for fraudulent inducement if the claim duplicates a concurrent claim for breach of contract. However, determining whether a fraudulent inducement claim is actually duplicative of a breach of contract claim has continually vexed litigants and courts. We will examine the factors that courts have employed in recent cases in order to determine whether a fraud claim is duplicative of a contract claim.
Fraudulent Inducement Claims Alleging Misrepresentations of Future Intent Will Be Dismissed as Duplicative. One of the primary areas that courts examine to determine whether or not a fraudulent inducement claim is duplicative of a contract claim is whether or not the complaint alleges a misrepresentation of "present fact" or "future intent to perform under the contract." Wyle Inc. v. ITT Corp., 130 A.D.3d 438, 439 (1st Dept. 2015). A future intent to perform—i.e., "that the defendant was not sincere when it promised to perform under the contract"—will be dismissed as duplicative. First Bank of the Americas v. Motor Car Funding, 257 A.D.2d 287, 291 (1st Dept. 1999). The "pleadings must allege misrepresentations of present fact, not merely misrepresentations of future intent to perform under the contract, in order to present a viable claim that is not duplicative of a breach of contract claim." Wyle, 130 A.D.3d at 439. In order for the fraudulent inducement claim to survive dismissal, the "misrepresentations of present fact must be collateral to the contract and must have induced the allegedly defrauded party to enter into the contract." Id. at 439. In explaining what misrepresentations are "collateral to the contract," the First Department has further explained that "[u]nlike a misrepresentation of future intent to perform, a misrepresentation of present facts is collateral to the contract (though it may have induced the plaintiff to sign the contract) and therefore involves a separate breach of duty." First Bank, 257 A.D.2d at 292.
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