Legal Question in Credit and Debt Law in Nevada

Promissory Note

Here is the legal question that I am currently researching:

Assuming that a party enters into a contractual obligation (in the form of a promissory note or a guarantee of a debt) in reasonable reliance upon the material false representations of a third person who is not a party to the obligation, what is the status of the obligation? Is it void, voidable at the option of the defrauded party, or enforceable by the innocent other party to the contract (with the defrauded party's remedy being to sue the person who committed the fraud)? I am assuming that the other party (in this case a Family Trust) did not ''know'' of the fraud, even though it may be asserted that a ''manager'' and beneficiary of the Trust, arguably did know or should have known of the fraud


Asked on 2/11/02, 2:18 pm

1 Answer from Attorneys
Alvin Lundgren Alvin R. Lundgren, L.C.

Re: Promissory Note

If A contracts with B, B can always enforce against A, even if A is relying on false promises of C. A may be able to sue C for indemnification, but will still be obligated to B. B contracted with A, without reliance on C, therefore can always enforce against A. Think of it as two contracts: A with B and A with C. Even though C defaults or commits fraud, A is still bound to the contract with B.

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Answered on 2/11/02, 3:22 pm


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