Orange County Business Litigation

Contractual Fraud

Misrepresentation is one of the most common forms of contractual fraud. Misrepresentation means a false statement of fact made by one of the parties to the other and has the effect of inducing that party into the contract. For example, under certain circumstances, false statements or promises made by a seller of goods regarding the quality or nature of the product that the seller has may constitute misrepresentation. When a misrepresentation is found in a contract, it is possible to look for a remedy of rescission and sometimes even damages, depending on the type of misrepresentation.


There are two types of misrepresentation in contract law:


  • Fraud in the factum focuses on whether the party in question knew they were creating a contract. If the party did not know that they were entering into a contract, there is no meeting of the minds, and the contract is void.

  • Fraud in inducement focuses on misrepresentation attempting to get the party to enter into the contract. Misrepresentation of a material fact (if the party knew the truth, that party would not have entered into the contract) makes a contract voidable.


According to Gordon v. Selico, it is possible to make a misrepresentation either by words or by conduct, although not everything said or done is capable of constituting a misrepresentation. Generally, statements of opinion or intention are not statements of fact in the context of contractual misrepresentation.


An order for specific performance and an injunction are both discretionary remedies, originating in equity for the most part. Neither is available as of right and a court will not normally order specific performance in most jurisdictions and most circumstances. A contract for the sale of real property is a notable exception. In most jurisdictions, the sale of real property is enforceable by specific performance. Even in this case, the defenses to an action in equity (such as laches, the bona fide purchaser rule, or unclean hands) may act as a bar to specific performance.


Related to orders for specific performance, when the contract prohibits a certain action an injunction may be requested. Action for injunction would prohibit the person from performing the act specified in the contract.


For more information about contractual fraud, misrepresentation and other business litigation matters please call or contact us today.



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