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Can Fraud Make a Contract Unenforceable?

by | Oct 2, 2019 | Business Law

The Misrepresentation Defense in Contract Litigation

Imagine you and your colleague decide to go into a small business venture together, which all seemed a good idea at the beginning. You sign a contract with your colleague that he had put together. Things go well for a while until one day you notice things just don’t seem right. At this point you look at the contract and see some suspicious terms. How can you then terminate the contract?

Research what is a valid contract.

A valid contract has an offer, an acceptance, and a consideration. Each state has its own set of exceptions for the requirement to a legal binding contract. In almost all cases the exceptions will consider fraud. Depending on the type of fraud and the extent of your damages, you may have a criminal or a civil case. First, investigate into considering an attorney to help you decide if there is even a valid contract between you and the other party. The contract must have the basic elements, which are: an offer, an acceptance, and consideration. The intent to establish a contract must be definite and apparent. “Certain Terms” refers to the terms of the contract and they identify the parties to the contract, the subject matter of the contract, the contact price, and the time to perform the contract. For example, Walsh tells Brown, “If you decide on purchasing my jet ski for $2,500, let me know by next Friday”. This offer identifies the parties (Walsh and Brown), the subject matter (jet ski), price ($2,500), time for performance, (by next Friday), and so contains the elements of a valid offer. Acceptance to assent to the terms of the offer communicated to the person who made the offer. “Consideration” is a bargained for exchange. Here, Walsh is selling a jet ski to Brown, and Brown is paying $2,500 for the jet ski. This is a promise for a promise. A consideration. So, a valid contract exists between Walsh and Brown. Should there be no valid offer, a valid acceptance or a valid consideration, there is not a valid enforceable contract.

Fraud is a Strong Defense Against Contract Enforcement

Fraud is a defense to enforcement of the contract. You must demonstrate more than a misunderstanding or a failure to read the contract before you sign it. To void a contract, you must show the misrepresentation was intentional and fraudulent. If your signature was forged, you have a defense of fraud in the execution, and the contract is void, and there is no legal contract. If you signed the contract on intentional misrepresentation of the terms in the contract, it would be fraud in the inducement. Meaning, the party was induced to sign the contract with intentional misrepresentation present. The contract would then be voidable. To end a contract, you file a civil suit to have the contract voided officially. If you and the other person accumulated assets from the business, the suit can also be combined with a suit to dissolve the business and divide the assets. If money was lost because of the misrepresentation, you can have a suit for fraud and deceptive trade practice, and your damages would be the money value of your losses. If the damages are quite extensive and there is an intent by the other party to obtain a fraudulent benefit, you may also have criminal remedies.

It is important to contact an attorney who specializes in contract law as they can advise you whether you have entered a valid contract and what remedies are best for your case.

At Akin Law, Dain and Sherrille Akin represent individual and business clients and specialize in small business litigation. Whatever your case may be, we can advise you on your legal rights. We are experienced in contract disputes, so don’t delay in calling us. We want to talk to you about your case. Call 386-271-4740