CONTRACTS & FRAUD

A contract is an agreement with specific terms between two or more persons or entities in which there is a promise to do something in return for a valuable benefit known as consideration. An insurance policy, for instance, is a contract. The policyholder is required to pay a price, sometimes called a premium, and the insurance company must fulfill the promises it has made in the insurance policy issued to you.

Most oral contracts are enforceable though proving the contract is more difficult because of the lack of documented proof of the contract and its terms. Some contracts, however, are required to be in writing, such as a contract for the purchase of land, though there are exceptions to this exception. For instance, Alabama Code Section 8-9-2(5) (1975) expressly provides that a contract for the sale of land is not required to be in writing if the purchaser pays “the purchase money, or a portion thereof,” and is “put in possession of the land by the seller.”

Damages for breach of contract include the following:

• Compensatory Damages: Money to reimburse you for costs to compensate for your loss. Often, this is the difference in the value of the goods or service as promised less the value of the goods or service actually provided.
• Incidental Damages: Incidental damages resulting from the seller’s breach include expenses reasonably incurred in inspection, receipt, transportation and care and custody of goods rightfully rejected, any commercially reasonable charges, expenses or commissions in connection with effecting cover and any other reasonable expense incident to the delay or other breach.
• Consequential Damages: Consequential damages resulting from the seller’s breach (a) Any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise; and (b) Injury to person or property proximately resulting from any breach of warranty.
• Specific Performance: A court order requiring performance exactly as specified in the contract. This remedy is rare, except in real estate transactions and other unique property, as the courts do not want to get involved with monitoring performance.
• Rescission: The contract is canceled and both sides are excused from further performance and any money advanced is returned.
• Reformation: The terms of the contract are changed to reflect what the parties actually intended. Generally, a contract action must be filed within 6 years from the date of breach. Alabama Code Section 6-2-34(9) (1975). A contract for sale of goods must be filed within 4 years from the date of breach though the limitation period may be reduced to 1 year as part of the contract. Alabama Code Section 7-2-725 (1975). Open or unliquidated accounts must be filed within 3 years from the date of the last item of the account or from the date the account is due. Alabama Code Section 6-2-34(4) (1975).

Fraud

Fraud can be separated into two classes. Innocent or legal fraud and intentional fraud. Innocent or legal fraud occurs where one party makes representations which are not true but the representations are made negligently without actual knowledge that they are false. Intentional fraud occurs where one party makes representations which are false and the party making the representations either knows that they are false or he/she makes the representations having information which would lead him/her to believe that they are false. A statement made with a reckless disregard to its truth is an intentional fraud.

What You Are Owed If You Are Defrauded

Punitive damages (damages to punish the wrongdoer) may be awarded if intentional fraud is established but not in cases of innocent or legal fraud. Intentional fraud can result in a very high punitive damage award, especially where the fraud is discovered to be widespread and the fraudulent party denies the fraud and/or shows no remorse. Fraud often occurs in contract cases. For example, one party will make a false representation which is relied upon by the other party in forming a contract. Insurance companies commit a species of fraud called “bad faith” when they fail to pay on a insurance claim which is clearly covered by the insurance policy and the insurance company has no debatable reason for failing to pay the policy claim.

Read Contracts Carefully Before Signing

A person must be very careful to read all contracts in Alabama though performing that task in the real world is difficult. In transactions involving land and vehicles, the contracts is almost always long and written in fine print and the seller provider wants you to sign without delay. Not with standing the real world, Alabama cases have recently held that if the contract contains a provision such as “The buyer does not rely on any representations of the seller not contained in this written contract”, then the buyer cannot later claim that the seller made false oral representations leading up to the signing of the contract. Exceptions to this rule appear to be cases in which the buyer cannot read or write.

Finding The Right Legal Help

Generally, a fraud action must be filed within 2 years from the earlier of the date of discovery of the fraud or the date when the discovery should have been discovered.

If you have been damaged by fraud or a breach of contract, call an attorney in our firm for an appointment.

We sincerely appreciate you considering Burns Garner Law Firm for your potential contract or fraud claim.