Contract and Fraud

Abstract

This Article explores evolving contract drafting practices that attempt to disclaim or otherwise diminish fraud claims. In addition to robust integration clauses and disclaimers of reliance upon extracontractual representations and warranties, contracts now often expressly stipulate a narrow definition of what constitutes fraud and which individuals count for purposes of attributing fraud to a contract party. Uneven court support for such provisions is often premised upon the public policy against fraud. This traditional justification, however, may not adequately address the actual contracting situation, particularly where sophisticated parties knowingly agree to contractual limits on liability. On the other hand, freedom of contract adherents illogically admit some limitation with respect to contractual fraud prohibitions, which is difficult to sustain once scrutinized. This Article examines the market dynamics and business response in light of different adjudicative approaches to fraud preclusion and suggests a renewed focus upon the role of information-sharing in the process of contract drafting and negotiation.

Keywords: Contract, fraud, disclaimer, reliance, representations, warranties, integration clause, anti-reliance clause