FLORIDA FRAUD AND BREACH OF FIDUCIARY DUTY LITIGATION
For more than 130 years, Florida law has recognized the concept that a contract entered into with a party who misrepresented or withheld material information in order to induce the other party to enter into the contract, will be set aside as void and unenforceable.
The Florida Supreme Court has consistently held that “Contracts are binding according to the mental comprehension and capacity of the contracting parties… Where one places reliance upon another, the one trusted shall not take advantage of such confidence to the prejudice of the other.” The Florida Supreme Court has identified the right of a person to voluntarily and freely enter into contracts or refuse so to contract as an “inherent and inalienable right of every person” and when such agreements are shown to be freely and voluntarily entered into, Florida courts usually will uphold and enforce them. However, the general right to contract is subject to the limitation that the agreement must not violate federal, state or local law, or some rule of the common law.
The interest protected by fraud is society’s need for true factual statements in important human relationships, primarily commercial or business relationships. More specifically, the interest protected by fraud is a plaintiff’s right to justifiably rely on the truth of a defendant’s factual representation in a situation where an intentional lie would result in financial loss to the plaintiff. Fraud in the inducement presents a special situation where parties to a contract appear to negotiate freely, but where in fact the ability of one party to negotiate fair terms and make an informed decision is undermined by the other party’s fraudulent behavior.
While Florida law continues to protect victims of fraudulent business practices, the Florida courts have struggled to define the boundaries where society’s interest in protecting against fraudulent conduct intersects with the concept that contracting parties must exercise certain basic, fundamental principles of self-protection and due diligence when entering into business transactions.
Under current Florida law, a lawsuit for fraud in the inducement requires the plaintiff to allege and prove (a) a misrepresentation of a material fact; (b) that the maker of the misrepresentation knew or should have known of the statement’s falsity; (c) that the maker intended that the representation would induce another to rely and act on it; and (d) that the plaintiff suffered injury in justifiable reliance on the representation. Furthermore, the plaintiff must allege and prove the fraudulent conduct with particularity, and must show the time frame when the fraudulent statement was made, who specifically made the false statement, the substance of the false statement and the context in which the false statement was made. As a general rule, a false statement of fact, to be a ground for fraud, must be of a past or existing fact, not a promise to do something in the future. Generally, statements of opinion or promises of future action are not actionable.
