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Commercial Leasing Law & StrategyFeaturesCommercial LitigationLitigation

'Sophisticated' Losers

By Joseph I. Farca
March 01, 2019

Your attorney just emailed you a copy of a court decision in your fraud case against a landlord who leased you space that you subsequently learned could not legally be occupied for your intended use. If the court decision called you "sophisticated," it was probably not intended as a compliment, but instead signaled the death knell of your fraud claim.

What's in a name? "Sophisticated" parties who cry "fraud" when they believe they did not receive the full benefit of their bargain are often turned away by the courts because they could and should have conducted due diligence before signing or closing on their contract.

New York: The Sophisticated

New York's fraudulent misrepresentation rule appears relatively simple on its face. It requires the complaining party to establish five elements, sometimes colloquially referred to as the "five fingers of fraud":

  1. A representation regarding a material fact;
  2. Which was false;
  3. Which was made with the intent to deceive;
  4. And on which the complainant reasonably relied;
  5. To his detriment.

See, Channel Master Corp. v. Aluminium Limited Sales, Inc., 4 NY2d 403, 407 (1958).

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