Business Law

QUESTION : Why is fraud in the inducement treated as a personal defense and fraud in the inception treated as a real defense ? Is the distinction treated as a real defense ? Is this distinction justifiable ? On what grounds

Under the law on negotiable instruments and in business law , fraud is general treated differently depending on the time of the occurrence . As a general rule , fraud is classified into fraud in the inducement , which pertains to the use of fraud by any party to the instrument constituting a misrepresentation that convinces or causes the

creation of a legal obligation in favor of another , and fraud in inception , also known as fraud in execution , which pertains to the use of fraud as a the main consideration for the creation of a legal obligation or document without which no document or obligation would have been created . Under these definitions , it is clear that the effects of fraud in inception and fraud in inducement are quite different from each other

Properly , fraud in inducement does not have a more absolute effect like fraud in inception . Statutes and law state that when the fraud that is employed is a misrepresentation in regard to the consideration or otherwise it is only allowed to be alleged as a personal defense . This means that only the person to whom this defense is available or who is in closest proximity to the occurrence may avail of this defense . No other person except the victim ' of such fraud is entitled to...