Business Development Dept. v. Huttenbauer

A negotiable instrument is defined for purposes of chapter 73 as a written order or promise of payment that is “(1) unconditional;...” ORS 73.0104(1); see UCC § 3-103 cmt 1 (2002). A party may avoid a contract under a fraud-in-the-inducement theory by proving that the other party to the contract made a false representation of material fact and that the person to whom the representation was made was induced to enter the agreement in reliance on that misrepresentation. See, e.g., Graves v. Tulleners, 205 Or App 267, 276-77, 134 P3d 990 (2006).

Plaintiff appealed the trial court’s order denying its motion for summary judgment and granting Defendant’s motion for summary judgment. On appeal, Plaintiff argued that the trial court erroneously concluded that the guaranty is a negotiable instrument as defined in ORS 73.0104 and subject to the limitation periods in ORS 73.0118. In response, Defendant argued that the guaranty was a negotiable instrument under ORS. 73.0104 and thus the action to enforce the guaranty was time barred. Alternatively, Defendant argued that the contract was avoidable because Defendant had entered the contract through Plaintiff’s fraud-in-the-inducement. A negotiable instrument is defined for purposes of chapter 73 as a written order or promise of payment that is “(1) unconditional;...” ORS 73.0104(1); see UCC § 3-103 cmt 1 (2002). A party may avoid a contract under a fraud-in-the-inducement theory by proving that the other party to the contract made a false representation of material fact and that the person to whom the representation was made was induced to enter the agreement in reliance on that misrepresentation. See, e.g., Graves v. Tulleners, 205 Or App 267, 276-77, 134 P3d 990 (2006).  The Court held that the trial court erred in granting Defendant's motion for summary judgment and in denying Plaintiff's motion for summary judgment. The trial court erred in concluding that the guaranty was a negotiable instrument because the guaranty was not an unconditional promise to pay. Furthermore, the Court held that there was no issue of material fact regarding the fraud-in-the-inducement claim by Defendant. General and supplemental judgments reversed and remanded.