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Current Developments in the Commercial Divisions of the
New York State Courts
Posted: October 25, 2015

False Statement of Intention to Perform Contract Insufficient to Support Fraud Claim

On October 14, 2015, Justice Scarpulla of the New York County Commercial Division issued a decision in Manda International Corp. v. Yager, 2015 NY Slip Op. 31920(U), dismissing a fraud claim as duplicative of a breach of contract claim.

In Manda International, the parties asserted claims, counterclaims and third-party claims relating to their “rights in certain construction contracts and commissions earned therefrom.” The third-party defendants moved to dismiss the third-party complaint. The court dismissed the third-party claim for fraud, explaining:

To state a cause of action for fraud, the plaintiff must prove a misrepresentation or a material omission of fact which was false and known to be false by defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury. Conclusory allegations of fraud are insufficient to support a fraud claim. Rather, where the cause of action is based upon fraud, the circumstances constituting the wrong shall be stated in detail.

Here, the [Third-Party Complaint] does not allege any statements by [the third-party defendant] other than his statements of the terms of the parties’ purported joint venture agreement, whereby [the third-party plaintiff] would be paid a weekly consulting fee of $2,500, his car allowance and other benefits, and 50% of the profits generated from projects that Manda closed. [The third-party plaintiff] alleges that, aside from agreeing to the financial terms and to the general scope of [his] work, [the third-party defendant] and [he] did not discuss or agree to any other terms. [The third-party plaintiff] claims that these statements induced him to enter into the joint venture with [the third-party defendant].

However, the essence of [the third-party plaintiff’s] claim is that he performed under the parties’ agreement by utilizing his considerable experience and wealth of contacts in the industry to obtain contracts for a proposed joint venture, yet he has failed to obtain any of the benefits that he earned. Thus, [the third-party plaintiff’s] fraud claim is based on alleged fraudulent misrepresentations related to [the third-party defendant’s] obligations under their purported agreement, and the fraud claim alleges no misrepresentations collateral or extraneous to the agreement. Therefore, [the] fraud claim is dismissed to the extent that it is based upon allegations that he was induced to enter into an agreement with [the third-party defendant].

To the extent that the fraud claim is based upon allegations that [the third-party defendant] induced [the third-party plaintiff] to enter into a contract while lacking the intent to perform it, those allegations are insufficient to support the claim.

(Internal quotations and citations omitted) (emphasis added).

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