FORT LAUDERDALE BUSINESS LITIGATION: DISCLAIMING FRAUD LIABILITY UNDER A CONTRACT IN FLORIDA

Business litigation often involves contractual disputes and related fraud claims arising between parties. In Florida, contracting parties are generally prohibited from using a contract to limit liability for fraudulent acts. This general prohibition exists because contracting parties are entitled to rely on each other’s representations before entering a contract. However, there is an exception to the rule that allows parties to disclaim fraud liability through a contract if the contract expressly prohibits parties from asserting fraud claims against each other. The inclusion of this express disclaimer language in contracts can significantly alter remedies available to parties in business litigation after signing a contract. Peter Mavrick is a Fort Lauderdale business litigation attorney, and represents clients in business litigation in Miami, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment law, and other legal disputes in federal and state courts and in arbitration.

Under Florida law, “[i]t is well settled that a party [cannot] contract against liability for his own fraud.” Oceanic Villas Inc. v. Godson, 4 So. 2d 689 (Fla. 1941). “A party cannot contract against liability for his own fraud in order to exempt him from liability for an intentional tort, and any such exculpatory clauses are void as against public policy.” Mankap Enterprises, Inc. v. Wells Fargo Alarm Services, a Div. of Baker Protective Services, Inc., 427 So. 2d 332 (Fla. 3d DCA 1983). “The interest protected by fraud is a plaintiff’s right to justifiably rely on the truth of a defendant’s factual representation.” HTP, Ltd. v. Lineas Aereas Costarricenses, S.A., 685 So. 2d 1238 (Fla. 1996). The singular exception to this rule narrowly applies when a party “expressly states that [the contract] is incontestable on the ground of fraud.” Global Quest, LLC v. Horizon Yachts, Inc., 849 F. 3d 1022 (11th Cir. 2017). A contracting party, therefore, cannot disclaim fraud without a clear expressed intention to do so. “Absent such a disclaimer, no matter the context, ‘a party can not contract against liability for [its] own fraud.’” Oceanic Villas Inc. v. Godson, 4 So. 2d 689 (Fla. 1941).

In Oceanic Villas Inc., Florida’s Supreme Court held that contractual provisions disclaiming fraud must be specifically expressed. See Global Quest, LLC v. Horizon Yachts, Inc., 849 F.3d 1022 (11th Cir. 2017). In Oceanic Villas Inc., a lessor fraudulently induced a lessee into a lease by misrepresenting certain facts relating to the rental property’s past income, gross receipts, or profits. 4 So. 2d 689 (Fla. 1941). The lessee sued to rescind the lease after discovering the fraudulent misrepresentations and the lessor argued the claim was barred by the lease’s broad release language. Id. However, the Florida Supreme Court rejected the lessor’s argument because the “clause of the contract . . . relied on does not stipulate that the lease may not be rescinded for fraud.” Id. at 691. In so doing, the court distinguished wavier provisions expressly prohibiting rescission due to fraud with other provisions merely stipulating that no fraud was committed and that neither party relied on the other’s prior representations when executing the contract. Id. (contrasting contractual provisions expressly prohibiting fraud claims with other provisions warranting the non-existence of fraud).

The more recent decision of Lower Fees, Inc. v. Bankrate, Inc. confirms eighty years of precedent prohibiting parties from disclaiming fraud unless a contractual provision contains the requisite specificity. 74 So. 3d 517 (Fla. 4th DCA 2011). In Lower Fees, the appellant sued for fraud and the appellee moved to dismiss arguing that the parties’ contract contained a broad non-reliance clause prohibiting fraud claims. Lower Fees ultimately rejected the appellee’s argument because Oceanic Villas requires a party disclaiming fraud to explicitly state his waiver in the contract. Lower Fees stated that: “[Florida’s] supreme court has spoken clearly that no contract provision can preclude rescission on the basis of fraud in the inducement unless the contract provision explicitly states that fraud is not a ground for rescission.” 74 So. 3d 517 (Fla. 4th DCA 2011). Where “a party alleges that a contract was procured by fraud or misrepresentations as to a material fact, an integration clause will not make the contract incontestable, and the oral representation may be introduced into evidence to establish fraud.” MeterLogic, Inc. v. Copier Solutions, Inc., 126 F. Supp. 2d 1346 (S.D. Fla. 2000). Therefore, contracting parties cannot waive fraud claims without specific language disclaiming any cause of action based on fraud, regardless how broad the disclaiming provision is in the contract.

Peter Mavrick is a Fort Lauderdale business litigation lawyer, and represents clients in Miami, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.