Can You Sue For Fraudulent Inducement In An Ohio Business Transaction?
When carrying out business dealings, both parties usually rely on the belief that the other is being truthful before signing a contract. However, a company or individual can enter into an agreement and later realize the information provided was misleading. This situation is called fraudulent inducement.
What is fraudulent inducement?
Fraudulent inducement occurs when one party makes a material misstatement that induces another party into entering a contract. The Ohio Supreme Court says that the issue is not the nature of the contract but the facts that made the person want to enter the contract.
For instance, a business person buying out another business firm after the seller tells them the business makes a specific yearly income. If the party lied about this information to facilitate the sale of the business, then there might be fraudulent inducement.
Likewise, fraud may occur when one party deliberately withholds information they should disclose.
What must be proven?
Not every incorrect statement during a business negotiation amounts to fraud. Under Ohio law, to prove fraudulent inducement, you must show false representations or omissions that were material to the deal, that the person making the representation knew it was false or they were reckless about its truthfulness, and that the intent was to induce reliance on bad information.
It should also be proven that the reliance is reasonable and caused harm.
The reasonableness of the reliance may be another question that arises. Ohio courts can consider the nature of the deal, the importance of the representations, the parties’ relationship, and their experience and knowledge, among other factors.
Fraudulent inducement vs. breach of contract
Breach of contract is not the same as fraudulent inducement. Usually, a breach occurs when one party violates the terms of the agreement by failing to fulfill an obligation it is required to perform.
However, it does not follow that any party can turn what would otherwise be a contract issue into a fraud claim simply because it can point to a prior oral promise that contradicts the agreement. In fact, the Ohio Supreme Court has held that while extra-contractual evidence can prove fraudulent inducement, it should not be used to contradict an integrated agreement.
This makes the contract wording crucial.
What remedies are available?
In this situation, a victim of fraudulent inducement can sue for damages or rescind the agreement altogether. Ohio law clearly distinguishes between affirming a contract and suing for damages for fraud, and between suing for damages and rescinding the agreement.
Since fraudulent inducement claims rely heavily on the facts of the case, businesses must ensure they preserve all emails, financial statements, agreements, text messages, negotiating papers, and other proof of representations made before executing the agreement.
If you entered a business deal based on fraudulent or misleading information, consulting a Columbus general business counsel attorney could prove useful.
Talk to a Columbus, OH, General Business Counsel Attorney Today
Kohl & Cook Law Firm, LLC, represents the interests of Ohio businesses in conflicts with other businesses. Call our Columbus general counsel business lawyers today to schedule an appointment, and we can begin discussing your case right away.
