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A MISREPRESENTATION OF PRESENT FACT, UNLIKE A MISREPRESENTATION OF FUTURE INTENT TO PERFORM UNDER A CONTRACT, WILL SUPPORT A FRAUDULENT INDUCEMENT CAUSE OF ACTION WHICH IS NOT DUPLICATIVE OF THE RELATED BREACH OF CONTRACT CAUSE OF ACTION (FIRST DEPT).

The First Department, reversing Supreme Court, determined the fraudulent inducement cause of action should not have been dismissed as duplicative of the breach of contract cause of action. The fraudulent inducement claim was based on an assertion of present fact. i.e., that defendants had sufficient capital to close on the property:

We reject defendants’ argument that the fraudulent inducement cause of action is duplicative of the breach of contract cause of action. “[A] misrepresentation of present fact, unlike a misrepresentation of future intent to perform under the contract, is collateral to the contract, even though it may have induced the plaintiff to sign it, and therefore involves a separate breach of duty” … . The alleged representations … that the judgment debtor had sufficient capital to close on the property were representations of present fact, not future intent to perform.

Similarly, we reject defendants’ argument that plaintiff seeks identical damages under the fraudulent inducement cause of action and the breach of contract cause of action. Under the circumstances of this case, at this early procedural stage plaintiff is entitled to maintain the fraudulent inducement claim in the alternative to the breach of contract claim … . This conclusion is especially true because the remedy available to plaintiff for fraudulent inducement under the “out-of-pocket rule” is not lost profits but rather “the actual pecuniary loss sustained as the direct result of the wrong” … . CSN Realty Corp. v Moussaieff, 2026 NY Slip Op 03228, First Deptt 5-21-26

Practice Point: Here the misrepresentation that the judgment debtor had sufficient funds to close was a misrepresentation of present fact which supported a fraudulent inducement cause of action distinct from the breach of contract cause of action.​

 

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