A breach of contract occurs when terms of a legally binding agreement are not adhered to by either party. On the other hand, fraud is the intentional deception to secure personal gains. Most contracts that are entered into by parties are genuine; however, some people engage in fraudulent contracts for their gains, which mostly are financial. Various circumstances make a breach of the contract become a fraud.
A breach of contract becomes fraud when one party makes a false representation of a material fact (whether spoken or by conduct) by providing false or misleading information or concealing information that should have been disclosed wherein the other party relies on such information. For instance, in the case (BV Nederlandse Industrie Van Eiprodukten v. Rembrandt Enterprises Inc), both parties entered into a contract where the dutch enterprise was to supply egg products to Rembrandt Enterprises in the United States. The dutch company gave an estimated figure for the cost of supplying the egg products into the United States, which was very high. They justified the high prices on the costs associated with the US regulatory requirements. Later on, it was discovered that the price had not only the regulatory requirements cost but also a profit for the Netherlands-based corporation, which resulted in a lawsuit. There was no doubt that there was fraud in breaching the terms of their contract.
Fraudulent conduct could also exist when there are “known” misunderstandings. For example, when one realizes another party misunderstands a contract’s material term, that party must correct that misunderstanding upon discovering that one party fails to understand all terms of the agreement completely. If this does not happen, the party with knowledge of the misunderstanding has breached the contract with fraud. An example of this is the suit Oakes v. Turquand. The court ruled that there was fraud in the contract by both parties in that the plaintiff had not understood the wheat business, and the plaintiff took advantage of that when coming into agreement. The plaintiff did not clarify the business at hand, which prompted the court to rule in favor of the defendant. From this case, it is evident that the plaintiff had motives for his own economic gains, which made the breach of the contract become a fraud.
Most parties enter into a various contract which is law binding. However, some of these contracts are breached and become fraud. Certain conditions make these broken contracts become a fraud. One of them is when a party provides false information for their own beneficial reasons. Another is when a party intentionally does not clarify details to another party who misunderstands a contract’s terms for financial gains. Such cases have become very common in today’s world, and harsh laws should be enacted to curb the rise of fraudulent contracts.