What Does "Fraudulent Inducement" Mean?
It is generally held that agreements should be made in good faith. For this to happen, all parties of an agreement should provide information that is accurate to the best of their knowledge. Fraudulent inducement refers a tort claim that can be made in instances where acts of good faith are based on information that is intentionally misleading.
A person is fraudulently induced when deceit and trickery are used to encourage her to act in someone else's favor. Generally, this also results in her acting against her own interests. Such a situation could arise, for example, if a woman decides to transfer her property to her son who is a physician based on his deceptive diagnosis that she will soon die. Since she was intentionally misled, she may have the right to seek damages for losses that occurred.
In order for a person to successfully claim fraudulent inducement, she must show that her reliance on the provided information was reasonable.
[Like, when it comes with the authority of the IMF. - MrK]
In the above mentioned example, the woman's belief in her son can be justified by the fact that he is a medical professional. If, however, her son was a painter, it may be difficult for her to convince a court that she had good reason to rely on his assessment of her health.
A person also needs to show that the fraudulent information was used as a basis for decision making. One party may make claims that deceive another party. Courts, however, tend to assess how large a role the deceptive information played in the choice that a person made.
[That is easy. The lies told to the Finance Minister by the IMF and World Bank directly led to the privatisation of Zambia's mines. - MrK]
Fraudulent inducement claims can be made with regards to both oral and written contracts.
[Like the oral assurance that copper prices would not rise within Edith Nawakwi's lifetime.
From The Post: IMF, World Bank pressured govt to privatise mines - Nawakwi
FORMER finance minister Edith Nawakwi has revealed that the IMF and the World Bank pressured the Zambian government to privatise the mines on the pretext that copper prices would not increase in 20 years. MrK]
It should be noted, however, that reliance on an oral contract may prove harmful to the aims of a person who claims that she was fraudulently induced. Courts have often ruled against such claims on the grounds that the information upon which a person relied should have been in writing.
[I would love the IMF to make that defense. Gee, you didn't get it in writing, of course you shouldn't have believed us. - MrK]
Courts have also ruled against cases in which an oral contract includes statements that are contrary to same matters that are addressed in a written contract.
There are instances, however, when a person may feel misled but the misleading party did not act intentionally.
[There is no way the IMF could know future copper prices. Therefore, they should have known that they could not possibly predict that copper prices would not rise within Edith Nawakwi's lifetime. - MrK]
Such instances often stem from the online sale of used goods. In many instances, the sellers provide descriptions using terms such as "good condition" or "almost new." These terms usually lack universal standards, meaning that one person's assessment can be wholly different from another person's. Fraudulent inducement claims brought in these cases are likely to be fruitless.