Little Known Fraud Fun Facts: The Secret is Out

Publication Source: The Legal Brief

Fraud claims are ubiquitous in commercial litigation. Indeed, fraud allegations of some sort permeate many Commercial Division cases. This article addresses some relatively little known or acknowledged aspects relating to the cause of action for fraud. Knowledge of these areas could yield great power in litigating fraud claims.

As explained below, while intent to defraud is a commonly-cited element, there is strong authority that intent need not be alleged nor proved if rescission, rather than damages, is sought. Further, while courts often proclaim that fraud claims cannot be based upon mere promises contained in contracts, a free-standing claim of fraud can indeed be based upon representations and warranties contained in a contract. Finally, while fraud enjoys an extended statute of limitations period, claims of negligent misrepresentation or constructive fraud do not benefit from the extended period.

Intent is not Required for Rescission

The basic elements of a cause of action for fraud are straightforward and often cited: “a material misrepresentation of a fact, knowledge of its falsity, an intent to induce reliance, justifiable reliance by the plaintiff and damages.” Eurycleia Partners, LP v. Seward & Kissel, LLP, 12 N.Y.3d 553, 559 (2009). It is not commonly known, however, that the element of “intent” is actually not required when the remedy sought is rescission. There is abundant authority for this point.

Read the full article here.

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Kevin Schlosser is a Shareholder and Chair of the Litigation and Alternative Dispute Resolution Department at Meyer, Suozzi, English & Klein, P.C. He handles complex commercial litigation, is on the Roster of the AAA National Panel of Commercial Arbitrators, serves as outside general corporate counsel, and is author of the New York Fraud Claims Blog, www.nyfraudclaims.com.

The Legal Brief is the official publication of the Suffolk County Bar Association, www.scba.org