Small Exception to Fraud and Contract Don’t Mix in Construction Law

Fraudulent Inducement considers the question “if a tort and contract claim can coexist in the same lawsuit when the tort claim is based on information provided to the plaintiff when the information ends up being proved false?”

Make sure to consult Sparks Law for your construction attorney needs as legal decisions relating to tort and contract can be very specific to particular facts and claims.

English: Alexandria, Virginia U.S. Custom Hous...

English: Alexandria, Virginia U.S. Custom House and Post Office (1900) Completed in 1858. Architect: Ammi B. Young (Photo credit: Wikipedia)

Remember all of my posts about how fraud and contract claims don’t usually play well in litigation?  Well, as always with the law, there are exceptions.  For instance, a well plead Virginia Consumer Protection Act claim will survive a dismissal challenge.

A recent opinion out of the Alexandria division of the U. S. District Court for the Eastern District of Virginia sets out another exception, namely so called fraudulent inducement.  In XL Specialty Ins. Co. v. Truland et al, the Court considered the question of whether both a tort and contract claim can coexist in the same lawsuit when the tort claim is based upon the information provided to the plaintiff when that information proves false.

As the courts of Virginia have held for years, only certain information and statements made pre-contract can be the basis for a fraud claim in the face of a contractual duty to perform.  One type of statement that is not properly the subject of a fraud in the inducement type claim is sales talk or opinion.  Such sales talk (for example claiming that your company is the best for the job) is not the subject of a fraud claim because it is not meant to be relied upon and that such talk is an opinion about future performance, not a false statement of present fact or intent.

By contrast, the statements made by the Trulands in this case were statements of fact that the defendants knew or should have known to be false.  As alleged by XL Specialty Insurance, the defendants made false representations on financial statements that formed the basis for the bonding and indemnity agreement between the plaintiff and defendant.  Furthermore, the plaintiff relied as is had to on these statements of financial health when deciding whether to enter into the contract in the first place.  The Court ruled that based upon these facts as plead in the Amended Complaint, the claims for fraud could proceed.

Because all of these legal decisions relating to tort and contract are very specific to the facts surrounding any particular set of claims, review of your particular situation by an experienced Virginia construction attorney is essential when either seeking to make a claim or defend against one.  Based on a thorough analysis of your situation your claims may allow you to make a tort claim along with any contractual claim if your situation meets one of the the narrow exceptions to the general rule that tort and contract don’t mix.

As always, I recommend reading the opinion in full for a great analysis of Virginia law on the interplay between tort and contract.

I welcome and encourage your comments below, please share your thoughts.  Also, please subscribe to keep up with the latest Construction Law Musings.


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