fraudulent inducement

Post image for Revisiting “No Reliance” Language in Contracts

A (fairly) recent 8th Circuit case reminded me of the importance of including “no reliance” language in even simple contracts.

Exploring the idea of drafting simplified contracts for simple situations, I posted a sample contract for a sale of goods a couple of years ago. The idea was to draft a B2B contract that would afford minimum effective legal protection in situations where there’s no special reason to think that the agreement would be litigated. A reader left the following comment and I revised my form agreement in response:

The Disclaimer of Warranty and Entire Agreement clauses are very likely insufficient to negate claims of fraudulent inducement. I would suggest having a clause to address a potential fraudulent inducement claim even under a “minimum effective legal protection” scenario to decrease the buyer’s opportunity to manufacture factual disputes that would preclude a dismissal in seller’s favor. Language acknowledging that the Buyer is entering into the agreement based only on its own inspection of the goods (even if the seller has superior/peculiar knowledge of the goods) and an acknowledgement that Seller has made no representations about the goods may help.

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Midwest Coal LLC v. Cabanas

In an action for fraudulent misrepresentation, the Missouri Court of Appeals, Western District affirmed the trial court’s grant of summary judgment in favor of the defendant, concluding that the plaintiff, a coal company, was unable to prove damages for lost profits.

Lost profits are generally not recoverable as damages, because they are too speculative; however, they are recoverable with sufficient proof to provide a rational estimate of the amount of lost profit. In this case, however, the plaintiff had never turned a profit and was unable prove its case. (“With no history of profitability, Plaintiff cannot present sufficient evidence to prove lost profits from an existing commercial business.”)

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