First Department Holds Performance of Existing Contractual Duties Does Not Establish Reliance for Fraud

Posted: October 21, 2026 / Written by: Thomas A. Kissane / Categories Fraud/Misrepresentation, Fraudulent Inducement

First Department Holds Performance of Existing Contractual Duties Does Not Establish Reliance for Fraud

On October 8, 2026, the Appellate Division, First Department held that a plaintiff does not plead detrimental reliance for fraud where the conduct allegedly induced by the misrepresentations consists of pre-existing contractual obligations. The case is Iberdrola Energy Projects v. Oaktree Capital Mgt., L.P., Case No. 2025-03514, affirming judgment by Justice Jennifer G. Schecter of the New York County Commercial Division, Index No. 652514/2021.

Iberdrola alleged that defendants’ misrepresentations and omissions caused it to incur additional labor, costs, and expenses in performing an Engineering, Procurement, and Construction contract. Rejecting the fraud claims, the Court explained:

Plaintiff failed to plead the element of detrimental reliance in support of its causes of action for fraud. Plaintiff alleges that defendants’ misrepresentations and omissions caused it to incur additional labor, costs and expenses as part of its obligations under the Engineering, Procurement, and Construction contract (EPC). Notably, however, none of the allegations supporting plaintiff’s fraud claims rely on any misrepresentations or failures to disclose by defendants that are collateral to the contract . . . . Thus, plaintiff’s fraud claims fail because the conduct into which plaintiff was allegedly induced consisted of pre-existing obligations under the EPC (see Megaris Furs v Gimbel Bros., 172 AD2d 209, 212 [1st Dept 1991]).

Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning fraud claims arising from contractual relationships.