Tuesday, July 05, 2011

contracts - releases, fraud in the inducement

Mackay v. Donovan - ED Pa. - July 1, 2011

Contractual release

A contractual release from litigation is an affirmative defense to a claim against any party to that release.7 That defense is generally asserted by motion for judgment on the pleadings or summary judgment.8 If the movant clearly establishes that there are no material issues of fact, a contractual release from a claim can be a complete defense to the pleadings.9 Releases are construed pursuant to the traditional principles of contract law, and a release that is not obtained by fraud, duress, or mutual mistake is binding between the parties.10 “The fundamental rule in interpreting a contract is to ascertain and give effect to the intent of the contracting parties. . . . The intent of the parties to a written agreement is embodied in the writing itself. . . . When contractual language is clear and unequivocal, its meaning must be determined by its contents alone.”11

Fraud in the Inducement

A release that is obtained by fraud is not binding between the parties.19 In order to state a prima facie case of fraud, a plaintiff must show (1) a representation; (2) which is material to the transaction at hand; (3) made falsely, with knowledge of its falsity or recklessness as to whether it is true or false; (4) with the intent of misleading another into relying upon it; (5) justifiable reliance on the misrepresentation; and (6) a resulting injury proximately caused by the reliance.20


4 Rosenau v. Unifund Corp., 539 F.3d 218, 221 (3d Cir. 2008); Sikirica v. Nationwide Ins. Co., 416 F.3d 214, 220 (3d Cir. 2005).

5 Allah v. Al-Hafeez, 226 F.3d 247, 249 (3d Cir. 2000).

6 Spruill v. Gillis, 372 F.3d 218, 223 (3d Cir. 2004).

7 Fed. R. Civ. P. 8(c).

8 Straight Arrow Prods. v. Conversion Concepts, Inc., No. 01-221, 2001 WL 1530637, *2 (E.D. Pa. Dec. 3, 2001).

9 Id.

10 Jordan v. SmithKline Beecham, Inc., 958 F. Supp. 1012, 1020 (E.D. Pa. 1997); Black v. Jamison, 913 A.2d 313, 318 (Cmwlth. Ct. 2006); Davis ex. rel. v. Gov’t. Emps. Ins. Co., 775 A.2d 871 (Pa. Super. Ct. 2001).

11 Crawford Cent. Sch. Dist. v. Commonwealth of Pa., 888 A.2d 616, 623 (Pa. 2005)(citation omitted).

19 Cf. Jordan, 958 F. Supp. at 1020; Black, 913 A.2d at 318.

20 Id.