New York courts generally enforce protections against fraud claims built into commercial contracts, reasoning that “evidence outside the four corners of [an agreement] as to what was really intended but is unstated or misstated is generally inadmissible to add to or vary the writing.” Bruni v. County of Otsego, 192 A.D.2d 939, 942 (3d Dep’t 1993). This is especially true when the parties’ agreement contains a merger clause providing that no party has relied on representations not set forth in the agreement itself.

To establish fraud, a plaintiff must plead and prove the following elements: a misrepresentation or material omission of fact which was false and known to be false by defendant, made for the purpose of inducing the other party to rely on it; justifiable reliance of the other party on the misrepresentation or material omission; and injury. Laduzinski v. Alvarez & Marsal Taxand, 132 A.D.3d 164, 167 (1st Dep’t 2015). When the parties’ agreement includes a merger clause, fraud litigation focuses on whether the plaintiff can establish the element of justifiable reliance, and courts often dismiss such claims for lack of justifiable reliance where faced with a merger clause. However, not all merger clauses are equal, and some are insufficient to bar such fraud claims.

The ‘Danann’ Standard