Legal Definitions - ubi dolus dedit causam contractui

Ubi dolus dedit causam contractui is a Latin legal principle that translates to "where fraud gave rise to the contract" or "where fraud was the cause of the contract."

This principle applies when one party's deceptive actions, misrepresentations, or concealment of material facts were the direct and essential reason another party entered into an agreement. In essence, if the fraud had not occurred, the contract would not have been formed. This concept is crucial in contract law, as it often provides grounds for the defrauded party to seek remedies, such as rescinding (canceling) the contract, because their consent was not genuinely given.

• Example 1: Misleading Business Sale

  A business owner, desperate to sell their struggling company, deliberately creates falsified financial statements showing inflated profits and hidden liabilities. A potential buyer, relying entirely on these fraudulent documents, agrees to purchase the business for a substantial sum.

  This illustrates the principle because the buyer would not have entered into the purchase agreement (the contract) had they known the true, dire financial state of the company. The seller's fraud directly "gave rise to" or "caused" the buyer to agree to the contract.

• Example 2: Concealed Property Defects

  A homeowner selling their property is aware of severe, undisclosed water damage and mold behind a newly painted wall in the basement. To prevent detection, they instruct their real estate agent to avoid showing the basement during viewings and actively deny any history of water issues when asked by prospective buyers.

  Here, a buyer, unaware of the significant hidden damage due to the seller's fraudulent concealment and misrepresentations, signs a contract to purchase the house. The buyer's decision to enter the purchase contract was directly induced by the seller's fraud; without it, they would likely not have agreed to the sale or would have negotiated a different price.

• Example 3: Fabricated Investment Opportunity

  An individual promotes an investment scheme, falsely claiming it involves a patented, cutting-edge technology that guarantees a 20% return on investment within six months with no risk. In reality, the technology is fictional, and the entire operation is a scam designed to defraud investors.

  An investor, persuaded by these elaborate and fraudulent claims of high, risk-free returns, signs an investment agreement and transfers a large sum of money. The investor's decision to enter into the investment contract was entirely based on the promoter's fraudulent misrepresentations; the fraud was the direct "cause" for the investor to commit their funds.