Fraud in the Inducement

The cats have returned from their vacation in Mexico.  They handed back my credit card and gave me a set of miniature, brightly colored salt and pepper shakers as a gift. They ask me how the sale of our book is going.  Without answering, I ask them if they limited their use of my credit card to $1,500 as agreed.  Neither of us is answering the other’s question.

I am aware that they have a claim against me for conversion of the books, but I have a claim against them for nonpayment of their promissory note, and  I  suspect that have made charges on my credit card beyond the agreed limit.  My claim against them is much greater than their claim against me, but I also know that any claim against them would be uncollectible.

I suggest that we enter into a mutual release of all claims, and the cats agree. I prepare the agreement, which I give to the cats at dinner that evening. The cats email it to their San Francisco attorneys for their review, and two weeks later I receive a revised draft of the mutual release.  It is now eight pages long and releases the cats from all claims, known and unknown, in any manner relating to nonpayment of the note or relating to their use of my credit card.  Before signing the agreement, I ask the cats once again if they exceeded the agreed limit while using my card in Mexico, and this time the cats assure me that they did not.  I believe them, since they are, after all, my cats, and I sign the mutual release.

A few days later I receive my credit card statement showing that the cats charged over $2,700 on my credit card, including over $400 just for alcohol and tips at the hotel bar.  I confront the cats with the bill, and they shrug it off, reminding me that I released them from all claims, including unknown claims, relating to their use of my credit card.  Their smiles disappear when I inform them that their deliberate misstatement to me that they had not exceeded the agreed limit on the card induced me to enter into the mutual release agreement, and that the agreement is therefore the product of fraud in the inducement and voidable.  I have a claim against them for their excessive use of my credit card despite the mutual release.

The cats are, once again, foiled by laws seemingly designed to frustrate their best laid plans.

Allen Drescher has practiced law in Ashland and Southern Oregon since 1973.  His practice areas include real estate, business law, estate planning and elder law.

© Allen Drescher