You Signed A Bad Contract, But Was It Fraud?
Fraudulent Inducement in Texas, or False Statements Which Made You Sign a Contract
Under Texas law, fraudulent inducement is a particular type of fraud that arises only in the context of a contract and requires the existence of a contract as part of its proof. In a fraudulent inducement claim the elements of fraud must be established as they relate to an agreement between the parties. Simply, fraudulent inducement occurs when one party induces the other party into singing or performing a contract with a fraudulent intent.
Fraudulent inducement requires a plaintiff to have reasonably and justifiably relied on the fraudulent misrepresentations. Importantly, a plaintiff suing for fraud must plead their fraudulent inducement claim with the level of particularity required by Rule 9(b). Rule 9(b) requires the plaintiff to “specify the statements contended to be fraudulent, identify the speaker, state when and where the statements were made, and explain why the statements were fraudulent.” Williams v. WMX Techs., Inc., 112 F.3d 175, 177 (5th Cir. 1997). But if a plaintiff was not harmed (i.e. no injury) then there can be no fraud. To state a claim for fraudulent inducement, a plaintiff must establish the elements of fraud.
Fraud Must Be Plead In Particular Detail
If fraud is not plead with sufficient particularity and details, the Court will only look to alleged misrepresentations contained within the contract itself. Any other alleged misrepresentations, if not specifically plead as to what misrepresentations might be, who made them, and when and where they were made, cannot be inferred absent a detailed pleading. For example, Plaintiff's allege misstatements regarding the rate at which they would be charged for the “Container Refresh program and the discretionary nature of the program” where they fail to identify the “contents, timing, or circumstances” of those statements was not sufficient to show fraud. SharpMexican Partners, LP v. Republic Waste Servs. of Texas, Ltd., No. 3:17-CV-1605-S, 2018 WL4053365, at *3 (N.D. Tex. Aug. 24, 2018); citing Hoffman v. AmericaHomeKey, Inc., 23 F. Supp. 3d 734, 742 (N.D. Tex. 2014).
A plaintiff alleging fraudulent inducement may introduce evidence of the prior oral communications that allegedly induced the plaintiff to enter into the contract, but the court will not disregard the express terms of the contract itself.
Reliance On The Fraud Must Be Justifiable
To establish a “justifiable reliance” in relation to the fraud that occurred, the reliance on the defendant's false statement(s) must have been reasonable. Ortiz v. Collins, 203 S.W.3d 414, 421 (Tex.App.-Houston [14th Dist.] 2006, no pet.) Importantly, contradictory statements, ambiguous statements, or obvious misrepresentations of a non-material nature readily discernible by plaintiff which are in direct contradiction to a the terms of a written agreement between the parties is not justified as a matter of law. DRC Parts & *543 Accessories, L.L.C. v. VM Motori, S.P.A., 112 S.W.3d 854, 858 (Tex.App.-Houston [14th Dist.] 2003, pet. denied) (en banc). See also Fisher Controls Intern., Inc. v. Gibbons, 911 S.W.2d 135, 142 (Tex.App.-Houston [1st Dist.] 1995, writ denied) (“When experienced executives represented by counsel voluntarily sign a contract whose terms they know, they should not be allowed to claim fraud in any earlier oral statement inconsistent with a specific contract provision.” (citing Boggan v. Data Sys. Network Corp., 969 F.2d 149, 153–54 (5th Cir.1992) (applying Texas law))). Thus, while a plaintiff may be able to introduce parol evidence of a defendant's misrepresentations in order to prove a claim of fraudulent inducement, where that parol evidence is directly contradicted by the express terms of the written agreement the plaintiff will always fail to prove the element of justifiable reliance. See Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 179 (Tex.1997) (“fraud must be something more than merely oral representations that conflict with the terms of the written contract”; citing Distributors Investment Co. v. Patton, 130 Tex. 449, 110 S.W.2d 47, 48 (1937)).
Effect of A Contract Merger Clause
If the contract and the circumstances of its formation clearly and specifically disclaim reliance on prior representations, then the element of reliance in a fraudulent inducement claim is negated as a matter of law. The Schlumberger court found such clear and specific intent where sophisticated parties, represented by competent counsel, included in their contract a disclaimer of reliance on prior representations, whether written or oral, negated such reliance for the purposes of fraudulent inducement .
Federal Rule 9(b) And Pleading Fraud With Particularity
When a plaintiff alleges fraud in his or her complaint, the plaintiff must plead the elements of its claims with the heightened particularity and proof required by Rule 9(b). See, e.g., Coates v. Heartland Wireless Commc'ns, Inc., 26 F. Supp. 2d 910, 914 (N.D. Tex. 1998). Rule 9(b) requires that “[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P, 9(b). “At a minimum, Rule 9(b) requires allegations of the particulars of time, place, and contents of the false representations, as well as the identity of the person making the misrepresentation and what he obtained thereby.” Benchmark Elecs., Inc. v. J.M. Huber Corp., 343 F.3d 719, 724 (5th Cir. 2003) (quoting Tel-Phonic Servs., Inc. v. TBS Int'l, Inc., 975 F.2d 1134, 1139 (5th Cir. 1992) ). In essence, Rule 9(b) requires the “who, what, when, where, and how” of the fraud. U.S. ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 903 (5th Cir. 1997).
Dallas Texas Top Corporate Fraud Lawyers
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