Commercial Division Blog

Posted: May 23, 2021 / Categories Commercial, Contracts, Fraud/Misrepresentation

Fraud Claim Cannot be Based on Misrepresentations of an Intention to Perform a Contract

On May 13, 2021, the First Department issued a decision in 320 W. 115 Realty LLC v. All Bldg. Constr. Corp., 2021 NY Slip Op. 03107, holding that a fraud claim cannot be based on the misrepresentation of an intent to perform an agreement, explaining:

In support of the fraudulent inducement claim, plaintiff's main allegations are that (1) defendants submitted an artificially low price, which they never intended to honor, in an effort to induce plaintiff to sign the contract, and (2) defendants did not intend to perform under the contract from the very start. However, a cause of action for breach of contract cannot be converted into one for fraud by merely alleging that defendant did not intend to fulfill the contract. Instead, an actionable claim for fraudulent inducement must allege the representation of present fact, not of future intent. Plaintiff has made no such allegations here.

(Internal citations omitted).

Commercial litigation frequently involves fraud-based claims. Such claims have special pleading requirements or rules, including the rule that a fraud claim cannot be based on nothing more than entering into a contract without intending to perform it. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client think you have been defrauded, or if someone has accused you or a client of defrauding them.

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