Legal Question in Real Estate Law in Illinois
Real Estate Sales Fraud
Background: Fact #1 - a buyer enters into a legally binding contractual agreement to purchase a home from a real estate development company (i.e. residential home building company). Fact #2 - the contract stipulates the buyer has the right to declare the contract null and void if the home is NOT available for occupancy by a specified date in the contract. Fact #3 - the contract stipulates the prompt return of all earnest money paid to the builder (i.e. residential home development company), IF the home is NOT available for occupancy by a specified date in the contract.
If the builder fails to honor the signed legal contract, the buyer will seek damages in the amount of the earnest money paid to the builder (residential home building company. BUT, what general conditions, under Illinois state laws, constitute real estate fraud in this example? In other words, what should the buyer look for to determine whether the builder (residential home building company) willfully and intentionally defrauded the buyer at the time contract was signed and earnest monies were paid?
1 Answer from Attorneys
Re: Real Estate Sales Fraud
Your question is very well articulated, and you raise a very interesting issue concerning the tension between contract law and tort law (i.e., fraud).
Generally speaking, an intention not to perform an executory contract does not constitute fraud, only breach of contract. In fact, to prove fraud, there must be a material misrepresentation of a present fact; therefore, the misrepresentation to do something in the future does not typically constitute fraud.
On the other hand, there exists case law in Illinois (and in other jurisdictions) that if one party misrepresents one's current belief -- i.e., states an opinion that the person does not then-hold -- it may constitute fraud because the misrepresentation is one of a present fact (the person's stated but not held belief).
In short, courts will not tolerate turning a mere breach of contract claim into a fraud claim. On the other hand, where the potential defendant seemingly misrepresented a present fact, a complaint will typically allege both causes of action, and the defendant will then typically move to dismiss the fraud claim, the propriety of which would be adjudicated by the court.
-- Kenneth J. Ashman; [email protected]; www.lawyers.com/alo
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