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Commercial Division Blog

Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: May 12, 2019

Fraud in the Inducement Claim Not Duplicative of Breach of Contract Claim

On May 1, 2019, the Second Department issued a decision inĀ 260 Mamaroneck Ave., LLC v. Guaraglia, 2019 NY Slip Op. 03307, holding that a fraudulent inducement claim was not duplicative of a breach of contract claim, explaining:

The plaintiff alleged, inter alia, that the defendant falsely represented in the contract of sale that he had not granted any rent abatements or concessions to one of the building’s commercial tenants, and falsely represented that the tenant was current on its rent payments. In February 2018, prior to interposing an answer, the defendant moved pursuant to CPLR 3211(a) to dismiss the complaint. The Supreme Court granted those branches of the motion which were to dismiss the causes of action alleging breach of contract but, inter alia, denied those branches of the motion which were to dismiss the causes of action alleging fraudulent inducement and fraudulent concealment. The defendant appeals.

. . .

We agree with the Supreme Court’s determination denying those branches of the defendant’s motion which were to dismiss the causes of action alleging fraudulent inducement and fraudulent concealment. Contrary to the defendant’s contention, those causes of action are not duplicative of the breach of contract causes of action. The elements of a cause of action alleging fraud are representation of a material existing fact, falsity, scienter, deception and injury. Here, the complaint, as amplified by the contract of sale and rider, as well as the lease between the defendant and the commercial tenant, sets forth cognizable causes of action alleging fraud in the inducement and fraudulent concealment.

(Internal citations omitted).

Commercial litigation frequently involves fraud-based claims. Such claims have special pleading requirements or rules, including the rule discussed here that a fraudulent inducement claim cannot duplicate a claim for breach of contract. 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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