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Fraud or breach of contract / Sign up for Free Webinar
February 8, 2021
Webinar announcement: Register now for this informative webinar
Title:  Forensic Analysis of Non-Conforming Control Panel(s); the UL issue
When:  February 16, 2021 at 12 PM noon ET  1 hour.  Will be recorded
Topic:  Analysis of risk if using control panels that don't meet UL and NFPA standards
Presented by:  Jeffrey Zwirn and  Merton Bunker, PE former NFPA employee and Staff Liaison for NFPA 72
Hosted by: Ken Kirschenbaum,Esq
Who should attend:  Alarm company owners, AHJs, Nationally Recognized Testing Laboratories and manufacturers

Sign up here:
Fraud or breach of contract 
            If you enter into a contract with another party who, as it turns out, never intended to perform the contract, does that raise the issue of fraud?  This can arise if your subscriber doesn’t let you do the installation after having delayed you for months, or a potential buyer of your alarm accounts dicks you around for months having you sign a Letter of Intent with exclusivity provision, locking you up for months, or other side of that coin, a seller who wastes the time of a potential buyer of accounts.
            A recent federal court decision reviewed this issue.  Here are segments from the decision dealing with this issue of fraud.
             Intent Not to Perform  Plaintiffs argue that the fraud and contract claims are not redundant because defendants “had no intention of ever performing the agreement,” but instead  intended to use it “as a subterfuge for conducting their wrongful scheme.” Plaintiffs maintain that these allegations are enough to sustain a fraud claim at the motion to dismiss stage because the concealed intent not to  perform was a misrepresentation when made that is collateral to the contract. Plaintiffs point to Deerfield Commc’ns Corp. v. Chesebrough-Ponds, Inc., which held that “a promise made with a preconceived and undisclosed intention of not performing it constitutes a misrepresentation” that  may be collateral to a contract. More recent cases construing Deerfield  have held that “where the promised performance is an obligation of the promisor  under an enforceable contract between the parties, and the only damages sought are  those recoverable for a breach of contract, allegations of such an ‘insincere promise’ are redundant of a claim for breach of the parties’ contract and, therefore, do not state a cause of action for fraud.” This rule “guards against the erosion of the distinction” 16 between contract and fraud claims.  Applying this reasoning, plaintiffs’ claim fails because they do not allege an insincere promise by defendants that is independent of defendants’ obligations under the agreement, and therefore collateral to the contract. Unlike the insincere promise in Deerfield, which was made orally to induce the promisee’s assent to the contract and was not included in its written terms, plaintiffs here  allege only that defendants never intended to perform their obligations under the terms of the contract itself. (explaining that Deerfield “involved  parol representations concerning geographic restrictions limiting product resales that were not contained in the contract, but which were not negatived by the contract; hence, the parol representations were held ‘collateral or extrinsic’ to the contract, and were thus enforceable”). Plaintiffs’ fraud claim is wholly grounded on promised performances that are “obligation[s] of the promisor[s] under an enforceable contract between the parties” and is therefore redundant of their contract claim. Citations omitted SKINITEMS.COM v CARDFLEX USDC, 2:19-cv-04790
            If it’s breach of contract it’s not fraud

NOTICE:  K&K has two clients looking to sell alarm accounts.  One company is near Orlando FL and the other outskirts of Miami FL.  More details in The Alarm Exchange in the Merger and Acquisition category.

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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
200 Garden City Plaza
Garden City, NY 11530
516 747 6700 x 301