Tex. Civ. Prac. & Rem. Code §§ 16.004(a)(4), 41.003, 41.008; PJC 105.2
Fraud in Texas — inducement, nondisclosure, and the disclaimer clause that kills the claim
A claim in Texas district and county courts · Last verified August 26, 2026
Fraud is what a plaintiff pleads when a contract claim will not carry the weight of the case. It reaches individuals personally, it opens the door to exemplary damages, and its four-year clock runs from discovery rather than from the act.
Texas has narrowed it from the defence side in one specific way that decides commercial cases: a contract can disclaim reliance, and a clear disclaimer bars the fraud claim outright. This page covers common-law fraud, fraudulent inducement, and fraud by nondisclosure, which are pleaded together from the same facts.
What the claim is
Someone lied to you about something that mattered, or stayed silent when they had a duty to speak, to get you to act — and you acted, and it cost you.
Where the right comes from
Common law. The elements come from a line of Texas Supreme Court cases including Formosa Plastics Corp. USA v. Presidio Engineers & Contractors, Inc., 960 S.W.2d 41 (Tex. 1998), and Italian Cowboy Partners, Ltd. v. Prudential Insurance Co. of America, 341 S.W.3d 323 (Tex. 2011).
What a plaintiff has to prove — PJC 105.2
- A material representation was made.
- It was false.
- The speaker knew it was false, or made it recklessly as a positive assertion without knowledge of its truth.
- The speaker intended the other party to act on it.
- The party relied on it, and the reliance was justifiable.
- The reliance caused injury.
Italian Cowboy, 341 S.W.3d at 337.
Fraudulent inducement
The same six elements, tied to the formation of a contract. A binding agreement is itself an element — without an enforceable contract there is nothing the plaintiff was induced into. Formosa Plastics is the case that freed this claim from the economic loss rule, holding that a fraud claim is independent of the contract even when the only losses are economic.
Fraud by nondisclosure
Silence is actionable only where there was a duty to disclose. The plaintiff must show the defendant deliberately withheld a material fact, knew the plaintiff was ignorant of it and had no equal opportunity to discover it, intended the plaintiff to act or refrain from acting, and caused injury. A duty can arise from a fiduciary or confidential relationship, from a partial disclosure that creates a false impression, or from a party's later discovery that an earlier statement has become untrue.
How long you have to file
Four years, under CPRC § 16.004(a)(4).
The discovery rule is built into fraud in Texas: the claim does not accrue until the fraud is discovered or could have been discovered by the exercise of reasonable diligence. Fraudulent concealment can defer accrual further where the defendant hid the wrong.
What has to happen before you file
Nothing. There is no notice requirement.
In federal court, Rule 9(b) requires fraud to be pleaded with particularity — the who, what, when, where and how. Texas state pleading is more forgiving, but a bare allegation of fraud invites a special exception or a motion under TRCP 91a.
What the claim pays
Out-of-pocket damages — the difference between what the plaintiff gave and what it received — or benefit-of-the-bargain damages, the difference between the value as represented and the value as received. Texas allows a plaintiff to elect between them.
Exemplary damages on clear and convincing proof under CPRC § 41.003, capped by CPRC § 41.008 at the greater of two times economic damages plus non-economic damages up to $750,000, or $200,000.
Rescission, as an alternative equitable remedy in an inducement case.
No attorney's fees for common-law fraud. This is the practical reason plaintiffs pair fraud with breach of contract, the DTPA, or statutory real estate fraud, each of which shifts fees.
Common defenses
- Disclaimer of reliance. A clear and unequivocal contractual statement that the party is not relying on representations outside the agreement defeats the reliance element.
- No justifiable reliance. Reliance is measured against the plaintiff's sophistication and access to the truth. A commercial party with the ability to verify is held to it.
- Opinion or puffery. Predictions, sales talk and statements of opinion are not actionable.
- Limitations, subject to discovery and concealment.
- The economic loss rule, where the claim duplicates a contract claim rather than standing independent of it.
The disclaimer of reliance — the defense that decides commercial cases
Italian Cowboy drew the line. A generic merger clause is not enough. A statement that the written agreement is the entire agreement does not disclaim reliance.
What works is language in which the party expressly says it is not relying on any representation outside the contract. Texas courts enforce that language between sophisticated parties represented by counsel who negotiated the clause at arm's length. Forest Oil Corp. v. McAllen, 268 S.W.3d 51 (Tex. 2008), sets out the factors.
What people get wrong
A merger clause does not bar a fraud claim. Only a specific disclaimer of reliance does, and the difference is a sentence of drafting.
There are no attorney's fees for fraud. Winning a fraud verdict does not make the other side pay your lawyer unless a companion claim carries fees.
Reliance has to be justifiable. A buyer who was told the roof was new, and who had a report saying it was not, did not justifiably rely.
Failing to perform a promise is not fraud unless the promisor had no intention of performing when the promise was made.
Where it came from
Texas fraud law was largely settled by the 1990s, and the movement since has been about the boundary between fraud and contract.
Formosa Plastics in 1998 held that fraudulent inducement survives the economic loss rule — a plaintiff who is lied into a contract can sue in tort even where the only injury is the lost benefit of the deal. Schlumberger Technology Corp. v. Swanson, 959 S.W.2d 171 (Tex. 1997), and then Forest Oil and Italian Cowboy built the counterweight, letting sophisticated parties contract out of reliance in clear terms.
The result is a claim that is strong where the parties did not negotiate the point, and often unavailable where they did.
Common questions
How long do I have to sue for fraud in Texas?
Four years, running from when you discovered the fraud or reasonably should have discovered it.
Can I recover attorney's fees?
Not for common-law fraud. Statutory fraud in a real estate or stock transaction does shift fees, and so does the DTPA.
Can I get punitive damages?
Yes, on clear and convincing proof, subject to the statutory cap.
Can a contract kill my fraud claim?
A specific disclaimer of reliance can. A general merger or entire-agreement clause cannot.
Is staying silent fraud?
Only where there was a duty to disclose — from a relationship of trust, from a partial disclosure that misleads, or from learning that something already said has become false.
What if they promised something and just did not do it?
That is breach of contract. It becomes fraud only if they never intended to perform when they promised.