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Fraudulent Inducement and Validity

Fraud is using deception in order to induce another to part with property or surrender some legal right and the parting with property or surrendering some legal right occurs.  Fraud vitiates all contracts, written or verbal, sealed or unsealed.[i]  If an assignment is obtained through some kind of fraud, the entire assignment in invalid.  Fraud destroys the validity of everything into which it enters.  It vitiates the most solemn contracts, documents, and even judgments.[ii]

There is no distinction between sealed instruments and unsealed ones contaminated with fraud.  Both are treated as void and the jurisdiction of courts of law extends equally to each.[iii] If an assignment is made with the fraudulent intent to delay, hinder, and defraud creditors, then it is void as fraudulent in fact.  In such case, the innocence of the creditors named in the deed will not save it from condemnation if there was fraud in fact on the part of the grantor.[iv]  The intentional withholding of assets from the assignee is regarded as a fraud upon the rights of creditors and it is sufficient to render the assignment void.[v]

However,  if a written contract fails to express the real intention of the parties because of fraud, mistake, or accident, the true intention is to be regarded and the erroneous parts of the writing disregarded.[vi] If the execution of an instrument is obtained by fraud, the instrument is not binding on the party executing it even if he or she did not read it.[vii]

[i] Landmark Dev. Group v. Tmk Assocs., 2002 Conn. Super. LEXIS 731 (Conn. Super. Ct. Mar. 5, 2002)

[ii] International Milling Co. v. Priem, 179 Wis. 622 (Wis. 1923)

[iii] Day v. New England Car-Spring Co., 7 F. Cas. 252 (C.C.D.N.Y. 1854)

[iv] Luckemeyer v. Seltz, 61 Md. 313 (Md. 1884)

[v] White v. Benjamin, 3 Misc. 490 (N.Y. Super. Ct. 1893)

[vi] Verry v. Murphy, 163 N.W.2d 721 (N.D. 1968)

[vii] International Milling Co. v. Priem, 179 Wis. 622 (Wis. 1923)

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