Fraudulent inducement—also known as fraud in the inducement—is a tort (wrongful act) claim or cause of action recognized in some states for fraud that occurs when one party to a contract intentionally misrepresents a material fact—usually regarding the risks, duties, or obligations involved—that another party to the contract reasonably relies on, causing the second party to enter into a contract it would not have agreed to if not for the fraudulent representation, and causing harm (damages or losses) to the party who reasonably relied on the misrepresentation.
Because fraudulent inducement combines elements of contract and tort law it is sometimes referred to as a "contort" claim or cause of action. In states that recognize a fraudulent inducement cause of action, the plaintiff may file a lawsuit and recover damages.
But a party who made an intentional misrepresentation may avoid liability if the other party contractually disclaimed any reliance on the first party’s fraudulent representations (a disclaimer of reliance provision in the contract). Whether a party is liable in any particular case depends on the contract’s language and the totality of the surrounding circumstances.
In Texas, fraudulent inducement is recognized as a cause of action when a party to a contract intentionally misrepresents a material fact, leading another party to enter into the contract based on that misrepresentation. The misrepresented fact must be one that the other party reasonably relied upon, and it must result in harm or loss to that party. This cause of action is a blend of contract and tort law, sometimes referred to as a 'contort' claim. Texas courts allow plaintiffs to file lawsuits and recover damages for fraudulent inducement. However, the party accused of making the misrepresentation may be able to avoid liability if there is a disclaimer of reliance provision within the contract that explicitly states that the other party is not relying on representations outside of the contract. The outcome of such cases will depend on the specific language of the contract and the overall circumstances surrounding the alleged fraud.
