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What is fraudulent inducement?

Fraudulent inducement is a type of legal claim often raised when a person has been tricked or defrauded into entering into a contract or transaction.

To establish a claim of fraudulent inducement, a victim must generally prove the following:

First, the fraudster made a misrepresentation of fact that was material
to the transaction.

Second, the fraudster knew that the misrepresentation was false.

Third, the fraudster made the misrepresentation to persuade the victim to agree to the transaction or contract.

Fourth, the victim relied on the misrepresentation.

Fifth, the victim would not have agreed to the contract or transaction if he or she had known the truth.

As a general rule, a victim cannot rely on a false statement if he or she knew it was false or if its falsity was obvious. Also, mere statements of opinion are usually insufficient to constitute fraud.

As an example of fraudulent inducement, imagine that a customer walks on to a used car lot to purchase a car. The salesman shows the customer a used vehicle and tells the customer that the vehicle has only 50,000 miles on the odometer. The customer buys the car. Later, the customer discovers that the vehicle actually had 100,000 miles, and the odometer has been altered. In such a case, the customer was fraudulently induced to enter into a contract to buy the car.

Please Note: Rabin Kammerer Johnson provides these FAQs for informational purposes only, and you should not interpret this information as legal advice. If you want advice as to how the law might apply to the specific facts and circumstances of your case, please click here to contact one of our attorneys.

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