SC: The usual exaggerations in trade; are not in themselves fraudulent
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SHOP HERE Types of Fraud in Contracts Fraud is defined in Article 1338 of the Civil Code as: x x x fraud when, through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to. This is followed by the articles which provide legal examples and illustrations of fraud. |
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Art. 1339. Failure to disclose facts, when there is a duty to reveal them, as when the parties are bound by confidential relations, constitutes fraud. (n)
Art. 1340. The usual exaggerations in trade, when the other party had an opportunity to know the facts, are not in themselves fraudulent. (n)
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Art. 1342. Misrepresentation by a third person does not vitiate consent, unless such misrepresentation has created substantial mistake and the same is mutual. (n)
Art. 1343. Misrepresentation made in good faith is not fraudulent but may constitute error. (n)
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Jurisprudence has shown that in order to constitute fraud that provides basis to annul contracts, it must fulfill two conditions. First, the fraud must be dolo causante or it must be fraud in obtaining the consent of the party. Second, this fraud must be proven by clear and convincing evidence.
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In Viloria v. Continental Airlines, this Court held that:
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Under Article 1338 of the Civil Code, there is fraud when, through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to. In order that fraud may vitiate consent, it must be the causal (dolo causante), not merely the incidental (dolo incidente), inducement to the making of the contract. In Samson v. Court of Appeals, causal fraud was defined as "a deception employed by one party prior to or simultaneous to the contract in order to secure the consent of the other." Also, fraud must be serious and its existence must be established by clear and convincing evidence.
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In Viloria, this Court cited Sierra v. Court of Appeals60 stating that mere preponderance of evidence will not suffice in proving fraud.
Fraud must also be discounted, for according to the Civil Code:
Art. 1338. There is fraud when, through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which without them, he would not have agreed to.
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Art. 1344. In order that fraud may make a contract voidable, it should be serious and should not have been employed by both contracting parties.
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Thus, to annul a contract on the basis of dolo causante, the following must happen: First, the deceit must be serious or sufficient to impress and lead an ordinarily prudent person to error. If the allegedly fraudulent actions do not deceive a prudent person, given the circumstances, the deceit here cannot be considered sufficient basis to nullify the contract. In order for the deceit to be considered serious, it is necessary and essential to obtain the consent of the party imputing fraud. To determine whether a person may be sufficiently deceived, the personal conditions and other factual circumstances need to be considered.
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