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Current Developments in the Commercial Divisions of the
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Posted: May 20, 2017

Fraud Claim Dismissed As Duplicative of Contract Claim

On May 5, 2017, Justice Singh of the New York County Commercial Division issued a decision in Solar Electric Systems, Inc. v. Skanska USA Building, Inc., 2017 NY Slip Op. 30962(U), dismissing a fraud claim as duplicative of a breach of contract claim, explaining:

A cause of action for fraud does not arise when the only fraud charged relates to a breach of contract. If the promise concerned the performance of the contract itself, the fraud claim is subject to dismissal as duplicative of the claim for breach of contract. If a party has breached a duty of reasonable care distinct from its contractual obligations, or when it has engaged in tortious conduct separate and apart from its failure to fulfill its contractual obligations, then a separate fraud claim could be warranted. Where a party is merely seeking to enforce its bargain, a tort claim will not lie.

Additionally, if a party seeks to enforce the promises of a contract in an action for breach of contract and is not entirely independent of contractual relations between the parties, a separate fraud action will not stand. Similarly, if there is no factual basis for recovery other than defendants’ failure to keep promises; damages sought thereunder would not be recoverable under a contract measure of damages. Where there is no collateral or extraneous allegation of fraud to the contract, the fraud claim must be dismissed as duplicative and redundant of the contract claim. Evidence of a claim that a party misrepresented its intent to perform the contractual obligations at the time they were made would also be dismissed as duplicative of a contract claim.

Here, it is without question that the underlying substance of both the breach of contract claim and the fraud claim is entirely of the same origination. Defendants allege in their Third Counterclaim that due to Solar’s breaches of the subcontract, Skanska overpaid and was subject to project liens which were not indemnified by Solar. These obligations of Solar arise from the agreement between the parties. Borducci had no separate or independent duty to the defendants, and the alleged false statements are tied directly to the harm caused by the breach of contract.
Additionally, defendants claim the exact same compensatory damages in both of the counterclaims, arising out of Solar failing to pay its subcontractors and suppliers. There is no alleged independent basis outside of the contract between the parties that would give rise to a cognizable fraud claim as the alleged justifiable reliance and inducement springs directly from the contract itself.

(Internal quotations and citations omitted).

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