Contractual fraud: legal framework and protection of the injured party
1. Introduction
Contractual fraud represents one of the most insidious violations of good faith in contractual relationships.
It occurs when a party, through deceit or fraudulent tricks, induces another party to enter into a contract that they would not have otherwise signed, or to agree to terms different from those they actually intended, thereby causing financial harm to the deceived party.
This form of deception has become increasingly common in commercial exchanges and negotiations between private individuals, making it essential to understand the legal remedies available, both in criminal and civil proceedings.
2. Article 640 of the Italian Criminal Code
Article 640 of the Italian Criminal Code punishes “Anyone who, by means of artifices or deceit, induces another into error and thereby obtains for themselves or others an unjust profit causing harm to another.”
In contractual contexts, the criminal offense consists of using fraudulent means to convince the other party to enter into an agreement that, in the absence of the deception, would not have been concluded, or would have been concluded under different terms.
To establish the crime, all elements set out in the statute must be present:
-
artifices or deceit, that is deceptive behaviors objectively capable of misleading the other party;
-
actual inducement into error on essential elements of the contract;
-
unjust profit gained by the perpetrator;
-
financial harm suffered by the victim.
3. Articles 1439 and 1440 of the Italian Civil Code
Under civil law, contractual fraud may result in the annulment of the contract.
Article 1439 of the Italian Civil Code states:
“Fraud is grounds for annulment of a contract when the deceit used by one of the parties was such that, without it, the other party would not have entered into the agreement.”
Article 1440 of the Italian Civil Code further clarifies:
“If the deceit was not such as to determine consent, the contract remains valid, even though it would have been entered into under different terms; however, the party acting in bad faith is liable for damages.”
These two provisions offer different forms of legal protection depending on the type of fraud:
-
fraud in the form of “decisive deceit”. This exists when, without the deception, the other party would not have entered into the contract at all. In such cases, the contract is subject to annulment, and the injured party is entitled to claim damages;
-
fraud in the form of “incidental deceit”. This occurs when the contract would have been entered into regardless, but under different conditions. In this case, the contract remains valid, but the deceived party is entitled to compensation for the damages suffered.
4. Conclusion
In summary, a victim of contractual fraud may seek legal remedy through two main avenues:
-
civil action, by filing a claim before the competent court (within five years from discovering the fraud), requesting the annulment of the contract and compensation for damages (in cases of decisive deceit), or seeking only compensation (in cases of incidental deceit);
-
criminal action, by filing a criminal complaint and later joining the criminal proceedings as a civil party, in order to obtain compensation for the damages suffered.
Given the potential risks inherent in any contractual negotiation—whether in commercial dealings or private transactions—it is strongly advisable to seek the assistance of a lawyer from the very outset of negotiations, especially when the contract involves significant financial obligations.
An experienced legal professional can assess the potential civil and criminal implications of any deceptive conduct, help prevent disputes from arising, and ensure the best possible protection for the client should litigation become necessary.
Founding Attorney
Jacopo Antonio Ahmad
For further information,Contact Us
