FORT LAUDERDALE BUSINESS LITIGATION: WHERE WRITTEN CONTRACTS NEGATE CLAIMS OF FRAUD

Not every written contract is sufficiently comprehensive to address potential fraud claims. Under Florida law, however, a well-drafted written contract can bar a business litigation claim for fraud that essentially covers the same territory as the contract. Florida’s Fourth District Court of Appeal in Mac-Gray Servs., Inc. v. DeGeorge, 913 So.2d 630 (Fla. 4th DCA 2005), held that “[a] party cannot recover in fraud for alleged oral misrepresentations that are adequately covered or expressly contradicted in a later written 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.

In Mac-Gray, the buyers entered into a contract with the seller for the purchase of laundry equipment. Before signing the contract, the seller’s agent allegedly told the buyers “that they were ‘pretty much guaranteed’ to make money as soon as the business opened.” The written contract, however, contained provisions that the seller did not guarantee any income or profits and that the buyers were not relying on the seller’s expertise or representations. The buyers delayed opening the business, and thereafter quickly sold what had become an unprofitable business. To recoup their losses, the buyers sued the sellers for fraudulent inducement of the contract. The buyers alleged the seller’s agent did not tell them they could lose money in the startup period and did not tell them that the seller had been involved in failed laundromats. The appellate court held that the fraud claim for damages was barred because the contract “negate[d] the fraudulent inducement claim” and did not guarantee profitability.

To attempt to prevent claims of fraud, contracts sometimes contain what are called “as is” clauses. However, not every “as is” clause is prophylactic. Such clauses sometimes are not comprehensive and do not bar fraud claims. Effective “as is” clauses are well-considered, extensive, and detailed. For example, in Florida Holding 4800, LLC v. Lauderhill Mall Investment, LLC, 317 So.3d 121 (Fla. 4th DCA 2021), the appellate court affirmed dismissal of a Broward County lawsuit claiming fraud. In Florida Holding, the contract had comprehensive “as is” provisions. They expressly stated that (1) “Seller makes absolutely no warranties, representations or covenants to Buyer whatsoever regarding the [p]roperty or the condition or quality thereof”; (2) “Buyer represents that it is purchasing the [p]ropery in its ‘As Is’ condition and based solely on Buyer’s own inspection, investigation and evaluation”; (3) “neither Seller nor any agent of Seller has made any representation or warranty, express or implied, oral or written, concerning the [p]roperty or which have induced Buyer to execute this Contract”; and (4) upon closing, Buyer “shall be deemed to have waived, relinquished and released Seller … from and against any and all claims.” The appellate court explained that these provisions “clearly negate Buyer’s claim for damages, including the fraud claims.” Similarly, Giallo v. New Piper Aircraft, Inc., 855 So.2d 1273 (Fla. 4th DCA 2003), held that, “[a]ssuming for purposes of argument that the oral statement is fraudulent, a party cannot recover for fraudulent oral representations which are covered in or contradicted by a later written agreement.”

While these cases address the viability of fraud claims seeking damages when there is a comprehensive contract addressing the factual basis of the alleged fraud, they do not address claims of rescission. Relying on precedent from the Supreme Court of Florida, Mantilla v. Fabian, 284 So.3d 575 (Fla. 4th DCA 2019), explained 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.” The key point of these cases is that the transactional contractual drafting of the sale contract should be comprehensive. The contract should consider and anticipate scenarios of “buyers remorse” to avoid a deal that the buyer merely does not like.

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.