Successfully Asserting a Fraud Claim in a New York Commercial Contract Dispute

In New York commercial cases, a fraud claim can—and often should—be pleaded alongside breach of contract where the misrepresentation is collateral to the agreement or seeks distinct relief. Recent trial-level decisions by judges in New York courts have allowed breach of contract, fraud and fraudulent concealment claims to proceed at the pleading stage when the complaint explains what was said or concealed, why it was false, and how the plaintiff relied to its detriment. See, e.g., Anand v. Sharma (Sup Ct, NY County, Sept. 3, 2025) (denying motion to dismiss negligent misrepresentation, fraud, and fraudulent concealment)

• Collateral misrepresentation: The knowing misrepresentation concerns a present material fact that is intended to deceive another party and induce that party to act on it, or special information outside the four corners of the contract (e.g., existing financial condition, ownership, prior defaults, regulatory problems).
• Distinct damages: The fraud claim seeks relief different from ordinary contract damages (e.g., out-of-pocket losses tied to the deceit, or—rarely—punitive damages).
• Authority & context: New York’s Court of Appeals recognizes fraud where the complaint permits a strong inference of scienter and explains justifiable reliance. See, Mandarin Trading Ltd. v. Wildenstein, 16 NY3d 173 (2011).

Fraud must be pleaded “in detail,” but New York does not require impossible specificity. The complaint should identify the substance of the misrepresentation or omission, who made it (or controlled the information), the context and approximate timing, why it was false when made, and how plaintiff reasonably relied. Courts relax particulars where the facts are within defendants’ knowledge. See Pludeman v. Northern Leasing Sys., Inc., 10 NY3d 486, 491–92 (2008). However, bare and conclusory allegations that fail to identify any specific misrepresentation of a material, present fact are not sufficient, are a basis for the court to dismiss the complaint at the pleading stage (i.e., before discovery). See, K.M. v. Ursuline Sch. Of New Rochelle, 2022 N.Y. Misc. LEXIS 47889 (N.Y. Sup. Ct., Jan. 26, 2022).

• Scienter: Plead facts supporting an inference that defendant knew the statement was false or spoke with reckless indifference. Conclusory intent allegations are insufficient; tie scienter to documents, internal knowledge, or contemporaneous conduct. See McNaughton v. 5 W. 14 Owners Corp., 235 AD3d 471, 473 (1st Dept 2025).
• Reliance: Allege how the misstatement caused the decision to enter the deal or to act (payments, extensions, foregone alternatives). In sophisticated deals, address disclaimers/integration clauses and explain why reliance remained justifiable. See Mandarin Trading, 16 NY3d at 178.
• Damages: New York fraud damages are usually out-of-pocket (actual pecuniary loss caused by the deceit), not benefit-of-the-bargain.

Q: Can I plead fraud and breach of contract together?

A: Yes—if the fraud is collateral to the contract or seeks distinct damages. If the claim simply restates non-performance, courts dismiss it as duplicative. Courts have held that claims for fraud are not duplicative of claims for breach of contract where the alleged misrepresentation “is one of present fact.” See Anand. In contrast, where a plaintiff merely alleges that a defendant never intended to abide by the terms of the parties’ contract, most judges would deem that to be duplicative of a breach of contract claim.

Q: How specific must fraud be pleaded under CPLR 3016(b)?

A: Provide the substance of the misstatement or omission, who made or controlled it, why it was false when made, approximate timing and context, and how you relied. Exacting detail is not required when key particulars are solely within defendants’ knowledge. See Pludeman, 10 NY3d at 491–92.

Q: What is “scienter,” and how do I allege it?

A: Scienter means knowledge of falsity or reckless disregard. Plead facts supporting a strong inference—e.g., internal documents, contradictory financial data, or a pattern of similar misrepresentations. See Eurycleia, 12 NY3d at 559; McNaughton, 235 AD3d at 473.

Q: Does an integration or no-reliance clause defeat fraud?

A: Not necessarily. Sophisticated parties must address such clauses; reliance may still be justifiable depending on the clause’s specificity and the nature of the misstatement. See Mandarin Trading, 16 NY3d at 178.

• Pludeman v. Northern Leasing Systems, Inc., 10 N.Y.3d 486 (2008).
• Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173 (2011).
• Ambac Assurance Corp. v. Countrywide Home Loans, Inc., 31 N.Y.3d 569 (2018).

About Rapaport Law
Rapaport Law Firm, PLLC • 80 Eighth Avenue, Suite 206, New York, NY 10011 • 212-382-1600

Disclaimer: This article provides general information about New York law and is not legal advice. Results depend on facts unique to each matter.