Fraudulent inducement happens when one party deceives another into entering an agreement based on false representations. For example, if your business enters into a contract with another business based on false business records they provided, that’s fraudulent inducement on the other business’s part.
How To Win Your Case
If someone defrauded you in this way, there are four elements you’ll need to prove to win your case. An experienced attorney can assist you in gathering evidence to prove these elements.
1. False Representation or Omission of Material Fact
The first element you must prove is that the other party falsely represented or omitted a key material fact. False representations could take the form of verbal statements, written communication, or even actions that imply something that isn’t true.
A business misrepresenting its financial health before a sale would be a false representation of a material fact. Or, a real estate agent hiding the fact that a building has foundation issues that need repair would be an omission of a material fact.
In either of these cases, you may have made a different decision had you known the truth. The false information or omission led you to make the decision you did.
2. Knowledge of Falsity and Intent to Defraud
The second element is that the other party knew their statements were false and intended to defraud you with them. The simple fact that the information provided to you was false is not enough on its own.
It can be challenging to prove that someone knew their statements were false or that they intended to defraud you. However, an experienced attorney may be able to gather evidence that supports your case. Emails, texts, and other internal communications can show the intent behind the fraudster’s statements.
You may also be able to get witnesses to testify on your behalf about the other party’s intent.
3. Reasonable Reliance by the Plaintiff
The third element is that you must show that you relied on the false statement when making your decision and that your reliance was reasonable. This means you must have done your due diligence and still failed to uncover that the statement was false or that there was an omission.
It could be that no publicly available information disputed what the other party told you. So, all you had to rely on was their word. Or, the other party may have intentionally hidden all evidence that pointed to the truth so you couldn’t find it when you searched.
4. Resulting Damages
The final element is that you must prove that you suffered losses as a result of acting on the false information provided by the defendant. Often, these damages will be the financial losses you suffered due to the false representation.
You and your attorney will need to show that there is a clear, causal link between the false representation and your losses. One way to do this may be through providing financial records that show the value of a property is not what the defendant claimed it was. In this case, your loss would be the difference in value.
You should also know that New York has an “out-of-pocket” rule that limits what damages you can seek compensation for in fraud cases. In Lama Holding Co. v. Smith Barney Inc., 88 N.Y.2d 413 (1996), the court confirmed that you can only sue for your actual losses, not the gains you potentially missed out on by not making a different decision.
New York Business Law Attorney
Have you been the victim of fraudulent inducement? Contact Levy Goldenberg’s knowledgeable commercial, business, and real estate attorneys. We’ll review your case during your initial consultation and walk you through your legal options.