Fraud in the Factum

Fraud in the factum involves a misrepresentation about the fundamental character of a contract or other instrument being signed which, if proven, renders that contract/instrument void, and not just voidable.

“[F]raud in the factum applies only in rare cases where the misrepresentation is regarded as going to the very character of the proposed contract itself, as when one party induces the other to sign a document by falsely stating that it has no legal effect . . . These rare cases include situations involving blind persons, illiterate persons, and foreign speaking persons.”  Harold Allen’s Mobile Home Factory Outlet, Inc. v. Early, 776 So.2d 777, 783 (Ala. 2000).

“A typical example of this involves a surreptitious substitution of one document for another and the innocent party signing it without knowledge or a reasonable opportunity to know the character or essential terms of the substituted document.”  Germantown Mfg. Co. v. Rawlinson, 491 A.2d 138, 144 (Pa. Super. Ct. 1985).

Fraud in the Factum vs. Fraud in the Inducement

“As to assent by deception, the distinction which has traditionally been drawn is between fraud in the factum and fraud in the inducement. Fraud in the factum involves a form of deception which results in a misunderstanding by the victim as to the very fact of the defendant’s conduct, while fraud in the inducement merely involves deception as to some collateral matter; the former cannot result in effective assent, but the latter can. For example, if a doctor engages in sexual intercourse with a female patient under circumstances in which she does not know what is occurring and believes that she is only submitting to an examination or operation, this is fraud in the factum and the woman cannot be said to have consented. On the other hand, if the doctor convinces the woman that she should submit to intercourse because this would be effective treatment for her illness, the woman has given effective consent because this is only fraud in the inducement.”  State v. Tizard, 897 S.W. 2d 732, 741 (Tenn. App. 1994).

“Unlike fraud in the inducement, involving false promises incident to a contract, fraud in the factum involves misrepresentation as to the very nature of the contract itself. If the other party neither knows nor has any reason to know of the character of the proposed agreement, the effect of such a misrepresentation is that there is not a contract at all.”  Cement Masons’ Pension Fund, Local 502 v. Clements, No. 91-c-8032 (N.D. Ill. Oct. 6, 1993).

Related entries