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Business Fraud: When It's More Than Just Breach of Contract

Business owners usually first think of bringing a breach of contract claim when they feel they've been wronged by a vendor, a client or a customer. However, often Slinde Nelson's business owner clients have other, potentially more potent claims at their disposal.

If the word "fraud" carries with it powerful connotations, that's because it's a powerful claim. In many cases, what a client thinks is a breach of contract is more properly (and powerfully) characterized as the legal claim known as fraud in the inducement.

A client may come in looking to file a breach of contract lawsuit in our Seattle office, for example, based on allegations that the vendors totally misrepresented their capacity to deliver a certain quantity of product. Or maybe a company needs to sue a vendor because the vendor misrepresented the quality of product in a shipment.

The appropriate claim may be for fraud, not breach of contract. Or it may be for both. The key difference is the existence of a misrepresentation. The business laws of both Oregon and Washington distinguish between a mere inability to hold up your end of the bargain, on the one hand, and lying about it on the other.

The former is a breach of contract and the latter is fraud. On a contract claim, the measure of damages is what profit your company could have made on the deal. These are known as benefit of the bargain damages. Those same damages are also available in a fraud claim.

The additional benefit of a fraud claim is that the plaintiff can claim rescission and restitution damages. What this means is that you can completely undo the contract, get back everything you gave and be placed in the position you were before the contract commenced. In certain circumstances, that is more important than the benefit of the bargain.

The upshot is that it's important to consult with a business law attorney whether you're in Portland, Tacoma, Seattle or anywhere in-between. What can seem like a straight-forward breach of contract case can actually be much more. A business law attorney can analyze your case and provide you the legal leverage points to drive a quick and profitable resolution.

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