Fraudulent Inducement Renders Contract Voidable, but Induced Party can Still Ratify Contract
Here’s an interesting tidbit when it comes to fraudulent inducement of a contract: the inducement renders a contract voidable (not void). See Buyer’s Choice Auto Sales, LLC v. Palm Beach Motors, LLC, 49 Fla. L. Weekly D1512a (Fla. 4th DCA 2024) (citation omitted). This means if a party claims they were fraudulently induced into entering a contract, and elects to sue for damages on the contract, even a contract procured by fraud, the election to sue for damages on the contract “ratifies the contract and ensures that a party who accepts the proceeds and benefits of a contract remains subject to the burdens the contract places upon him.” Buyer’s Choice Auto Sales, supra (internal quotations and citation omitted).
In a dispute dealing with a commercial lease, a tenant operating a used car dealership sued its commercial landlord to terminate its lease based on the landlord’s refusal to install fencing. The tenant claimed it was fraudulently induced into entering a lease renewal based on the landlord’s representation it would install such fencing for security of the leased premises which the landlord refused to do. The trial court found the landlord fraudulently induced the tenant into signing the lease and the tenant was entitled to terminate the lease. The issue on appeal was whether the tenant was obligated to pay rent during the pre-termination and post-termination periods it was occupying the leased premises. The appellate court held the tenant was responsible to pay this rent.
Here, even though Tenant sued to terminate the Lease, Tenant also sued Landlord for breach of contract damages stemming from Landlord’s failure to install fencing. Tenant nevertheless accepted the benefits that the leased premises provided to Tenant’s used car lot business during the pre-termination and post-termination occupancy periods. We find these facts support Tenant’s ratification of the Lease and thus, Tenant cannot simultaneously avoid the Lease’s burdens while accepting the Lease’s benefits.
Buyer’s Choice Auto Sales, supra.
Although the landlord did not install the required fencing, it did not render the lease wholly untenantable. “Tenant, even amidst security concerns, operated its used car lot business on the leased premises for nineteen months following the Lease renewal.” Buyer’s Choice Auto Sales, supra. In other words, “Tenant enjoyed the benefits which the leased premises provided for nineteen months, including operating Tenant’s used car lost business, earning income, and suffering only ‘speculative’ damages purportedly due to no fencing.” Id.
The bottomline: you can’t have your cake and eat it too. Here, the tenant would be entitled to a windfall had it not been required to pay rent during the pre-termination and post-termination occupancy periods.
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