A Good Examination of Fraud, Contract and Negligence Per Se

house photoI have spoken on several occasions here at Construction Law Musings about the interplay (or lack thereof) between fraud and contract as it relates to construction in Virginia. The general rule is that fraud and contract claims don’t mix and a fraud claim in the face of a contractual one is likely to be dismissed. However, there are exceptions to this rule as there are to just about every legal rule (we construction lawyers would be out of a job without them).

A good examination of the interplay between fraud and contract was set out by the Eastern District of Virginia federal court in Zuberi et al v. Hirezi et al. In that case the Zuberis purchased a home from the Hirezis and later filed suit alleging that the Hirezis concealed serious structural defects that made the house uninhabitable and unsellable. Among the many claims by the Zuberis were those fro fraud, fraudulent inducement, constructive fraud, negligence per se, violation of the Virginia Consumer Protection Act, and civil conspiracy. In short, they were out for blood.

After dismissing the claims (not outlined here) against the realtor and his agency, and going through the analysis that claims based upon the contract cannot be subject to a fraud claim, the Court considered the claims by the Zuberis that the sellers fraudulently induced them into entering the purchase contract by concealing the serious issues with cosmetic fixes and further assurances that any problems would be fixed prior to the execution of the contract. In looking at these last the Court allowed the fraudulent inducement claim to proceed based upon the timing of the concealments and the nature of those concealments. The Court further allowed the VCPA claim to move forward for the same reasons.

The Court then examined the negligence per se count plead based upon the Virginia state building codes and state real estate licensing statutes. The Court dismissed these claims because the building code was not meant to protect the purchaser’s economic interest and because the real estate licensing statutes are not for the purpose of public safety.

I recommend this opinion as a great primer on the interplay among contract, fraud, and negligence per se. As always, I recommend that you read the opinion yourself and let me know if you read it differently than I.

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