Texas Causes of Action & Affirmative Defenses

Texas Causes of Action & Affirmative Defenses

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Wednesday, May 25, 2011

Fraudulent Inducement claim requires proof of additional element

FRAUD RELATING TO A ENTRY INTO CONTRACT

In a fraudulent inducement claim, the elements of fraud must be established as they relate to an agreement between the parties. Esty v. Beal Bank S.S.B., 298 S.W.3d 280, 303 (Tex.App.--Dallas 2009, no pet.). The elements of fraud are (1) a material false representation, (2) that was made with knowledge or recklessness as to its falsity, (3) with the intent to induce reliance, and (4) that the other party “actually and justifiably relied upon,” causing him injury. Ernst & Young, L.L.P. v. Pac. Mut. Life Ins. Co., 51 S.W.3d 573, 577 (Tex. 2001); Wil-Roye Inv. Co. II v. Wash. Mut. Bank, FA, 142 S.W.3d 393, 411 (Tex.App.--El Paso 2004, no pet.).

RELIANCE ON REPRESENTATION: Was it reasonable, justifiable? 

Whether reliance is justifiable depends on the nature of the contract and the parties’ relationship. Coastal Bank SSB v. Chase Bank of Tex., N.A., 135 S.W.3d 840, 843 (Tex.App.--Houston [1st Dist.] 2004, no pet.). A party must generally exercise ordinary care for the protection of his own interests and is charged with knowledge of all facts that would have been discovered by a reasonably prudent and similarly situated person. Thigpen, 363 S.W.2d at 251; Wil-Roye, 142 S.W.3d at 411. Since he failed to raise a fact issue regarding the existence of a fiduciary duty, Garcia’s avowed subjective trust in Vera is insufficient to show that his reliance was justifiable. See Thigpen, 363 S.W.2d at 253; see also DRC Parts & Accessories, L.L.C. v. VM Motori, S.P.A., 112 S.W.3d 854, 858 (Tex.App.--Houston [14th Dist.] 2003, pet. denied)(“[R]eliance upon an oral representation that is directly contradicted by the express, unambiguous terms of a written agreement between the parties is not justified as a matter of law.”).

 SOURCE: El Paso Court of Appeals - 08-09-00084-CV - 4/29/11