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Current Developments in the Commercial Divisions of the
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Posted: May 20, 2014

Fraudulent Inducement Claim Not Duplicative When Based on Misrepresentations of Present Facts Collateral to Contract

On May 13, 2014, the First Department issued a decision in Shugrue v. Stahl, 2014 NY Slip Op. 03460, holding that a fraudulent inducement claim was not duplicative of a breach of contract claim.

In Shugrue, the First Department reversed the trial court’s dismissal of a fraudulent inducement claim, explaining:

Plaintiffs’ fraudulent inducement claim was not duplicative of their claim for breach of contract, since it was based on misrepresentations of then present facts that were collateral to the contract, and involved a breach of duty distinct from, or in addition to, the breach of contract. Indeed, the complaint alleged that . . . the chief executive officer and sole shareholder of the corporate defendants, misrepresented to plaintiffs that defendants had obtained all of the required permits and approvals and had completed the construction plans for their home renovation project, which induced plaintiffs to enter into the construction contract with defendants in October 2012.

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

This decision gives a roadmap to pleading a fraudulent inducement claim that can be made in tandem with a breach of contract claim and survive a motion to dismiss.

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