8 Breach of Contract Accompanied by Fraudulent Act

• Library: Elements of Civil Causes of Action (SCBar) (2015 Ed.)

8 Breach of Contract Accompanied by Fraudulent Act

A. Definition

An action for breach of contract accompanied by a fraudulent act is one in contract, not tort. ¹ It is not a combination of a claim for fraud and breach of contract,² and it is not necessary to allege elements of common law fraud and deceit.³

B. Elements

(1) a breach of contract

(2) fraudulent intent relating to the breach

(3) a fraudulent act accompanying the breach⁴

C. Elements Defined

1. A Breach of Contract

Breach of contract is a necessary but not sufficient allegation for a cause of action for breach of contract accompanied by a fraudulent act.⁵ The plaintiff must, of course, first establish that there was a contract between the parties.⁶

Since damages is an element of an action for breach of contract, it is also an element of the tort action and if there is no competent, admissible evidence of the existence or amount of damages, the claim fails.⁷

2. Fraudulent Intent Relating to the Breach

The fraudulent intent must relate to the breaching of the contract, not merely its making.⁸ The intent is "normally proved by circumstances surrounding the breach,"⁹ and may or may not involve false representations.¹⁰

3. A Fraudulent Act Accompanying the Breach

A fraudulent act is one characterized by dishonesty in fact, unfair dealing, or unlawful appropriation of someone else's property by design.¹¹ Neither nonfeasance nor a mere statement without more constitutes a fraudulent act sufficient to meet the requirements of the cause of action.¹² The act, although separate and distinct from that constituting the breach, must accompany it and not be too remote in either time or character.¹³ It may be prior to, contemporaneous with, or subsequent to the breach.¹⁴ The standard of proof of clear and convincing evidence is applicable to the third element of this claim.¹⁵

D. Defenses

A cause of action for breach of contract accompanied by fraud is governed by the statute of limitation for contract actions.¹⁶ The limitations period for contracts is three years,¹⁷ and may be extended by the discovery rule.¹⁸

E. Remedies

Actual and punitive damages¹⁹ may be recovered for a breach of contract accompanied by a fraudulent act.²⁰

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Notes:

^[1] Harper v. Ethridge, 290 S.C. 112, 348 S.E.2d 374, 378 (1986); Ateyeh v. Volkswagen of Florence, Inc., 288 S.C. 101, 341 S.E.2d 378 (1986); Peeples v. Orkin Exterminating Co., 244 S.C. 173, 135 S.E.2d 845 (1964); Wilson Group, Inc. v. Quorum Health Resources, Inc., 880 F. Supp. 416, 424 n. 6 (D.S.C. 1995) (although cause of action has elements of contract and fraud, it is contractual in nature). See also Dunsil v. E.M. Jones Chevrolet, Inc., 268 S.C. 291, 233 S.E.2d 101, 103 (1977) (error for judge to charge law of breach of contract accompanied by fraudulent act in action for fraud and deceit).

^[2] Ball v. Canadian American Express Co., Inc., 314 S.C. 272, 442 S.E.2d 620 (Ct. App. 1994). See also Williams v. Intier Automotive Interiors of America, Inc., ___ F. Supp. 2d ___, 2011 U.S. Dist. LEXIS 13925 (D.S.C. February 10, 2011) (properly pleading fraud is not sufficient to establish breach of contract accompanied by fraud as latter action is not simply combination of claim for breach of contract and for fraud and is not based on same elements as action for fraud).

^[3] Harper v. Ethridge, 290 S.C. 112, 348 S.E.2d 374, 378 (1986). Note that in Neuman v. Levan, ___ F. Supp. 2d ___, 2009 U.S. Dist. LEXIS 55139 (D.S.C. June 25, 2009) the federal court said that when a plaintiff alleges breach of contract accompanied by a fraudulent act, he or she must plead the allegations of fraud with particularity. The court cited Fed. R. Civ. P. 9(b) which applies a heightened pleading standard to claims of fraud. The court granted the defendant's motion to dismiss because the plaintiff failed to "allege fraud with particularity and instead resorted to general, conclusory statements."

^[4] Harper v. Ethridge, 290 S.C. 112, 348 S.E.2d 374, 378 (1986); Minter v. GOCT, Inc., 322 S.C. 525, 473 S.E.2d 67 (Ct. App. 1996). See also Crago v. Capital Advantage Fin. & Dev., Inc., 242 F.R.D. 341 (D.S.C. 2007) (plaintiff made requisite allegations in proposed amended complaint and should not be denied leave to amend complaint to add action for breach of contract accompanied by fraudulent act).

^[5] Peeples v. Orkin Exterminating Co., 244 S.C. 173, 135 S.E.2d 845 (1964); Roberts v....