Fraud Claims Delaware Law Drafting Effective Disclaimers Extra Contractual Representations

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1. Prairie Capital andFdG Logistics make it clear that, under Delaware law, a disclaimer of reliance upon extra-contractual representations must be drafted from the perspective of the plaintiff to effectively bar a fraud claim based on those representations. The Chancery Court explained in both cases, however, that a specific formulation is not requir
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Although the court barred the fraud claim, it clarified that: (1) when drafting disclaimer language, Delaware law does not require magic words to be effective; (2) anti-reliance provisions may be drafted affirmatively or negatively; and (3) a clear anti-reliance provision serves to preclude both fraud claims based on extra-contractual representations

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First, the seller disclaimed making any extra-contractual representations. Second, the buyer acknowledged that seller was not making any extra-contractual representations about information provided during …

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Delaware law provides ample guidance for parties wishing to preserve (or to preclude) off-contract fraud claims using clear and unambiguous language. Uncertainties do arise, however, particularly

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insight into the treatment of fraud claims in the acquisition context under Delaware law, especially the element of reliance, and how to successfully disclaim reliance on representations outside the acquisition agreement. The most recent opinion provides guidance on the meaning of “threatened” claims, a concept used in many indemnity provisions. Finally, the oral transcript …

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Delaware law does not require magic words." The anti-reliance clause barred fraud claims based on both extra-contractual representations and omissions. - The Court explained that parties in an arms' length contractual setting, such as the negotiation of the SPA, do not have an affirmative duty to speak.

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The Delaware Court of Chancery recent provided explicit guidance to drafters of M&A agreements and those that litigate such agreements, to the extent that it provides clarion instruction on the prerequisites for contractual clauses that will bar extra-contractual claims for fraud. In the case styled ChyronHego Corporation v.

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Practical Law Commercial Litigation. June 2020, Peter J. Walsh, Jr. and Clarissa Chenoweth-Shook. A Q&A guide to fraud claims under Delaware law. This Q&A addresses the elements of actual fraud, including material misrepresentation and reliance, and other types of fraud claims, such as fraudulent concealment and constructive fraud.

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Since Abry and RAA, Delaware courts have further delineated how non-reliance clauses must be drafted to effectively preclude extra-contractual fraud claims: No “Magic Words. ” The Court of Chancery has held that no particular words are required to bar extra-contractual fraud claims.

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Under Delaware law, the contractual indemnity cap and the exclusive remedy provision in an acquisition agreement cannot prevent a seller from independently pursuing a tort-based claim for rescission or alternatively damages against a seller engaged in fraud in an amount in excess of the indemnity cap.

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The elements of a cause of action for fraud in Delaware are: 1. A false representation was made, usually one of fact. 2. Party making the representation had knowledge or belief that the representation was false, or made the representation with the …

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Delaware law provides significant assurances to parties seeking protection against fraud liability for extra-contractual statements—but only by taking advantage of the “playbook” outlined by the Court of Chancery.

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The defendants attempted to reconcile this conflict by arguing that Sections 10.2 and 10.4 capped their liability for claims of fraud and Section 10.10 limited the effectiveness of this cap only to the extent that the alleged fraud concerned extra-contractual representations and warranties. The Court found that the defendants’ argument was a reasonable construction of the SPA; …

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While the Delaware Chancery Court denied the buyer's claims for breach of contract, promissory estoppel and unjust enrichment, the court permitted the buyer's claim based on fraud to proceed

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The trial court dismissed the fraud claims, and Plaintiff appealed. The 5th District Court of Appeals affirmed the trial court’s decision, and wrote a lengthy opinion addressing Florida law with respect to fraud in the inducement claims. The Court also certified certain questions to the Florida Supreme Court regarding whether a non-reliance clause in a contract can defeat …

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The Court found that the anti-reliance clause rebutted the common law fraud element of reliance on any extra-contractual representations, as described further below. At the same time, the Court dismissed the defendants’ motion to dismiss claims for fraud and breaches of express representations and warranties under the stock purchase agreement, finding that the …

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However, in Extra Equipamentos E Exportacao Ltda. v. Case Corp., the Seventh Circuit determined that the plaintiff was precluded from pursuing its fraud claim as no reasonable jury could find that the plaintiff did not understand the meaning of the no-reliance clause. Thus, the no-reliance clause included within the contract "serve[d] a legitimate purpose in closing a …

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Frequently Asked Questions

What constitutes contract fraud under delaware contract law?

Delaware public policy prohibits a party from contractually insulating itself from liability for fraud involving deliberate inaccuracies in representations and warranties within the four corners of the contract.

Can delaware enforce non reliance and exclusive remedy provisions to shield parties from fraud?

The court held that Delaware public policy prohibits the enforcement of non-reliance and exclusive remedy provisions to shield a party from fraud claims based on deliberate “lies” in the contract itself.

What is the difference between new york and delaware real estate fraud laws?

Finally, it bears mentioning that, in contrast to Delaware, New York will permit fraud claims based on omissions, even in arms-length transactions. If left unaddressed, enterprising buyer’s counsel could drive the proverbial truck through this distinction post-closing.

Can extra contractual representations be used as evidence in a fraud claim?

When the fraud claim is predicated on extra-contractual representations, it is impossible to prove the existence of representations made outside of the contract if such extra-contractual representations cannot be admitted into evidence.

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