Can a Co-Signer Sue for Fraud?
Full Question:
Answer:
Courts have held that a party may rescind a contract for fraud, incapacity, duress, undue influence, material breach in performance of a promise, or mistake, among other grounds. In order to prove a fraud claim, it must be shown that the defendant had an intent to deceive. If deception was used to induce another to rely on a promise and such reliance caused harm, it is possible to recover damages. Fraud may be made by an omission or purposeful failure to state material facts, which nondisclosure makes other statements misleading. Please see the fraud statutes below to determine applicability. I am prohibited from giving a legal opinion, but if a person is aware of the fraudulent nature of another's act, he or she cannot be a victim of the fraud, as that person's awareness prevents him or her from being deceived. I suggest you contact a local attorney who can review all the facts and documents involved. If you wish to pursue a legal remedy in court, you may wish to review the following information regarding contracts.
A legal action for breach of contract arises when at least one party's performance does not live up to the terms of the contract and causes the other party to suffer economic damage or other types of measurable injury. A lawsuit for breach of contract is a civil action and the remedies awarded are designed to place the injured party in the position they would be in if not for the breach. Remedies for contractual breaches are not designed to punish the breaching party. The five basic remedies for breach of contract include the following: money damages, restitution, rescission, reformation, and specific performance. A money damage award includes a sum of money that is given as compensation for financial losses caused by a breach of contract. Parties injured by a breach are entitled to the benefit of the bargain they entered, or the net gain that would have accrued but for the breach. The type of breach governs the extent of damages that may be recovered. Restitution is a remedy designed to restore the injured party to the position occupied prior to the formation of the contract. Parties seeking restitution may not request to be compensated for lost profits or other earnings caused by a breach. Instead, restitution aims at returning to the plaintiff any money or property given to the defendant under the contract. Plaintiffs typically seek restitution when contracts they have entered are voided by courts due to a defendant's incompetence or incapacity.
To prove a material breach of contract that relieves a party of the obligation to perform their end of the bargain, it must be shown that the breach was significant enough to cause the transaction that was bargained for to no longer have value. It will be a matter of subjective determination for the court based on all the facts and circumstances involved, to determine if there has been a material breach of the contract or fraud. If a breach or fraud is found, it is possible that the contract may be rescinded and/or damages may be recovered.
Rescission is the name for the remedy that terminates the contractual duties of both parties, while reformation is the name for the remedy that allows courts to change the substance of a contract to correct inequities that were suffered. In order to have a rescission, both parties to the contract must be placed in the position they occupied before the contract was made. Courts have held that a party may rescind a contract for fraud, incapacity, duress, undue influence, material breach in performance of a promise, or mistake, among other grounds. Specific performance is an equitable remedy that compels one party to perform, as nearly as practicable, his or her duties specified by the contract. Specific performance is available only when money damages are inadequate to compensate the plaintiff for the breach.
Promissory estoppel is a term used in contract law that applies where, although there may not otherwise be an enforceable contract, because one party has relied on the promise of the other, it would be unfair not to enforce the agreement. Promissory estoppel arises from a promise which the promisor should reasonably expect to induce action or forebearance of a definite and substantial character on the part of the promisee and which does induce such action or forebearance in binding if injustice can be avoided only by enforcement of the promise.
Detrimental reliance is a term commonly used to force another to perform their obligations under a contract, using the theory of promissory estoppel. Promissory estoppel may apply when a promise was made; reliance on the promise was reasonable or foreseeable; there was actual and reasonable reliance on the promise; the reliance was detrimental; and injustice can only be prevented by enforcing the promise. Detrimental reliance must be shown to involve reliance that is reasonable, which is a determination made on an individual case-by-case basis, taking all factors into consideration. Detrimental means that some type of harm is suffered. Reasonable reliance is usually referred to as a theory of recovery in contract law. It was what a prudent person might believe and act upon based on something told by another. Sometimes a person acts in reliance on the promise of a profit or other benefit, only to learn that the statements or promises were either incorrect or were exaggerated. The one who acted to their detriment in reasonable reliance may recover damages for the costs of his/her actions or demand performance. Reasonable reliance connotes the use of the standard of ordinary and average person.
The following are SC statutes:
§ 16-13-240. Obtaining signature or property by false pretenses.
A person who by false pretense or representation obtains the signature
of a person to a written instrument or obtains from another person any
chattel, money, valuable security, or other property, real or personal,
with intent to cheat and defraud a person of that property is guilty of
a:
(1) felony and, upon conviction, must be fined not more than five
hundred dollars and imprisoned not more than ten years if the value of
the property is five thousand dollars or more;
(2) felony and, upon conviction, must be fined in the discretion of the
court or imprisoned not more than five years if the value of the
property is more than one thousand dollars but less than five thousand
dollars;
(3) misdemeanor triable in magistrate's court if the value of the
property is one thousand dollars or less. Upon conviction, the person
must be fined or imprisoned not more than is permitted by law without
presentment or indictment of the grand jury.
§ 16-13-250. Effect when obtaining signature or property by false
pretenses amounts to larceny.
If upon the trial of any person indicted for a misdemeanor under
the provisions of § 16-13-240 it shall be proved that he obtained the
property in such a manner as to amount in law to larceny he shall not,
by reason thereof, be entitled to be acquitted of such misdemeanor. No
person tried for such misdemeanor shall be liable to be afterwards
prosecuted for larceny upon the same facts.
§ 16-13-260. Obtaining property under false tokens or letters.
A person who falsely and deceitfully obtains or gets into his hands
or possession any money, goods, chattels, jewels, or other things of
another person by color and means of any false token or counterfeit
letter made in another person's name is guilty of a:
(1) felony and, upon conviction, must be fined in the discretion of the
court or imprisoned not more than ten years, or both, if the value of
the property is five thousand dollars or more;
(2) felony and, upon conviction, must be fined in the discretion of the
court or imprisoned not more than five years, or both, if the value of
the property is more than one thousand dollars but less than five
thousand dollars;
(3) misdemeanor triable in magistrate's court if the value of the
property is one thousand dollars or less. Upon conviction, the person
must be fined or imprisoned not more than is permitted by law without
presentment or indictment by the grand jury.
