Parties exchange drafts of a contract and before signing one party surreptitiously substitutes provisions in the copy to be executed. Some might call this "promissory fraud", but as Justice William Dato explains in an opinion published yesterday, that would be a misnomer:
It goes by various names—fraud in the factum, fraud in the execution, fraud in the inception—but they all describe the same genre of deceit. It occurs where, after parties have agreed upon certain contract terms, one of them surreptitiously substitutes a document for signature that looks the same as the earlier draft but contains materially different terms. Fraud in the 2 execution is distinct from promissory fraud, which involves false representations that induce one to enter into a contract containing agreed upon terms.
Munoz v. PL Hotel Group, LLC, 2022 Cal. App. LEXIS 1.
While it is easy to condemn this species of fraud, there are countervailing policy considerations. If courts allow too much lenity, they invite parties to be negligent, or worse, perjurious. According to Justice Dato, courts therefore require that the "plaintiff must not only have been ignorant of the surreptitiously inserted terms, but must also have had no reasonable opportunity to learn that the document contains them".
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