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Current Developments in the Commercial Divisions of the
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Posted: June 6, 2017

Promise Made With Preconceived Intention of Not Performing Supports Fraudulent Inducement Claim

On May 30, 2017, the First Department issued a decision in White v. Davidson, 2017 NY Slip Op. 04219, holding that allegations of a promise made with the present and undisclosed intention of non-performance is sufficient to state a claim for fraudulent inducement, explaining:

With respect to the other four alleged promises or claims, the complaint adequately alleges that defendants made specific representations concerning the actions that they would undertake to promote plaintiff’s single in order to induce him to self-fund their promotional campaign while never intending to perform, and were, in effect, engaging in a Ponzi scheme. Although mere promissory statements as to what will be done in the future are not actionable, if a promise was actually made with a preconceived and undisclosed intention of not performing it, it constitutes a misrepresentation of a material existing fact upon which an action for rescission may be predicated. Such misrepresentations are collateral to the agreement, and can form the basis of a fraudulent inducement claim.

(Internal quotations and citations omitted).

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