Parties to negotiations over commercial contracts unfortunately may discover, after the deal closes, that aspects of the transaction are not as expected. The financial condition of the company acquired may be weaker than believed, or the acquired project in development may not be as far along as represented. Contractual representations and warranties usually are included to protect against these risks. But what if, in addition to breaches of contractual representations and warranties in the contract, the buyer feels it was outright defrauded during the negotiations?
Under New York law, the courts generally look at several guideposts in determining if viable fraud claims, independent of any claim for breach of contract, can arise in such situations. First, courts consider whether the alleged misrepresentations were made extraneous or collateral to the contract. Second, courts examine whether misrepresentations were of current fact as opposed to a misrepresentation of intention to perform in the future. Third, courts look to whether the alleged misrepresentations simply duplicate the breach of contract claims. We examine below the recent application of these principles in the Commercial Division.
Extraneous to the Contract
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