Fool me once, shame on you! Fool me twice, shame on me!

If a religious organization is tricked into entering into a contract, Florida courts recognize that organization’s ability to sue the offending party under a claim titled fraudulent inducement. However, the organization’s reliance on the misrepresentations that fooled the organization must have been reasonable.  In a recent Florida appellate opinion, the court adopted a “fool me once, shame on you, fool me twice, shame on me” approach to find a claimant’s reliance on defendant’s misrepresentations unreasonable, resulting in the claim being dismissed.

The Court found:

If the plaintiffs were defrauded by an allegedly fraudulent inducement…to enter into the Merger Agreement in 2014, and the performance that was promised was not forthcoming, they certainly could not justifiably rely on further inducements to enter into the 2016 Share Issuance Agreement and its sweeping release. The principle is that “after the assertion of claims involving dishonesty, the claimant in negotiations culminating in a settlement and release cannot rely on oral representations made by the party already asserted to have been dishonest.”

This principle of law seems obvious.  However, religious organizations’ desire to forgive the wrongful actions of others leaves open the possibility that an organization may wish to give a contracting party a second chance.  Such an approach is dangerous. Should the organization be misled a second time resulting in damages to the organization, the religious organization may be prohibited from pursuing a lawsuit for fraudulent inducement into the second contract.