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Business Litigation: Fraud in Contract Formation Part 2

| Jun 20, 2014 | Business Litigation

In last week’s business litigation Blog article we discussed fraud in the formation of contracts, and how to differentiate certain scenarios that involve fraud from straight breach of contract situations.  In this brief article we will discuss other types of fraud as they relate to contracts.  Buffington Law Firm’s breach of contract and business fraud attorneys have litigated many cases involving business fraud.  In these Blog articles we seek to inform the general public concerning some of the basics of this type of business litigation.

Probably the most common type of fraud involving contracts is fraudulent misrepresentation.  This is usually a situation where the defendant makes a false representation of fact to the plaintiff which the defendant either knows to be untrue or at least has no reasonable basis for believing it to be true.  [See generally Cal. Civil Code Section 1710(1,2,3)].  If the Plaintiff reasonably relies upon the Defendant’s false statement, and is harmed (i.e. suffers money damages) from such reliance, this can give rise to ground for a fraud action.  This is obviously a much less subtle type of fraud allegation by the Plaintiff than the subject of last week’s Blog article, which dealt with fraud in situations where the Defendant entered into a contract without the honest intent of honoring it.  [See generally Cal. Civil Code Section 1710(4)].  The latter, fraudulent intent, is often notoriously difficult to prove.  On the other hand, in a lawsuit it is often possible to objectively prove that the relevant statements by the Defendant were untrue, and that the Defendant either knew or should have known that such statements were untrue.  Since lawsuits are all about persuasive proof, lawsuits involving this kind of fact pattern are usually much more practical and cost-effective to litigate than one in which the Plaintiff is trying to prove fraudulent intent.

If you are involved in a breach of contract or fraud situation, we invite you to call Buffington Law Firm for a free legal consultation directly with one of our experienced business litigation trial attorneys.  In this meeting we will discuss your case with you and give you an objective assessment.

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