The promise is the lie: A litigator's guide to pleading promissory fraud

Every litigator knows the moment: a new client, furious about a broken promise, insists he is the victim of fraud. Promissory fraud may be the most commonly asserted but routinely under pleaded claim in California litigation. Practitioners allege it reflexively, yet few complaints survive a well-aimed demurrer because they omit what matters most: contemporaneous facts showing the promise was false when made.

Getting the pleading right transforms case dynamics. A well-pleaded promissory fraud claim introduces punitive damages exposure and expanded discovery. A poorly pleaded one signals to opposing counsel, and to the court, that the case lacks teeth.

The challenge is pleading the promisor's fraudulent intent, specifically the promisor's state of mind at the time of the promise, through well-pleaded facts. Practitioners must plead promissory fraud at the beginning of the case, before discovery commences. Complicating matters, some decisions suggest that a plaintiff may allege fraudulent intent in general terms. Because intent rarely admits direct proof, courts permit it to be inferred from circumstantial facts, but not from nonperformance alone.

Practitioners thus face a recurring question: is a general allegation sufficient, or must the complaint plead facts showing that the promise was false when made?

This article examines what allegations suffice to plead fraudulent intent and offers practical guidance on how courts evaluate those allegations.

When is a broken promise fraud?

A broken promise is not fraud unless the lie existed at the moment of the promise. To plead promissory fraud, a plaintiff must allege facts establishing the intent not to perform at the time the promise was made. Behnke v. State Farm Gen. Ins. Co., 196 Cal.App.4th 1443, 1452-53 (2011).

Why plead promissory fraud instead of breach of contract? The primary draw is punitive damages. Unlike contract remedies, which make the plaintiff whole, fraud permits punishment and often shifts settlement leverage, especially where reputational or insurance concerns are implicated.

Where a party obtained property by false pretenses, Penal Code Section 496 may offer treble damages. Unlike promissory fraud, Section 496 requires actual acquisition of property through fraud. In most broken-promise cases, however, promissory fraud remains the operative claim.

As with other fraud claims, this showing must satisfy California's heightened pleading standards. Practitioners sometimes overlook that each element requires particularity.

Particularity requires pleading the substance of the promise, who made it, to whom, when, how, and in what context.

Why claims fail

Promissory fraud claims tend to fail when the pleadings rely on conclusory assertions of intent or facts that occurred after the promise.

To distinguish fraud from a broken promise, the complaint must allege clear factual circumstances suggesting contemporaneous intent not to perform. Bare assertions that a defendant "never intended to perform," without supporting facts, are insufficient.

The following boilerplate allegation, for example, is insufficient: "Defendant knew that the promise was false as defendant never had the intent to keep the promise."

Yet, even facts amounting to an "unkept promise or mere failure of performance" are still not enough. Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Assn., 55 Cal.4th 1169, 1183 (2013); Magpali v. Farmers Group, Inc., 48 Cal.App.4th 471, 480 (1996) (something more than nonperformance is required to show fraudulent intent).

For example, Scafidi v. Western Loan & Bld. Co. is instructive. There, the court held that alleging money was borrowed for a stated purpose and later not used that way did not, without more, show intent not to perform when the promise was made. Scafidi v. Western Loan & Bld. Co., 72 Cal.App.2d 550, 558 (1946).

In Beckwith v. Dahl, 205 Cal.App.4th 1039, 1060 (2012), the defendant promised to prepare trust documents that would divide her brother's estate equally with his partner. Beckwith is often cited for the proposition that a plaintiff may allege states of mind generally. But the claim survived because the defendant's conduct, including estrangement from the decedent, failure to prepare any documents, and concealment of surgical risks, contradicted that promise at every turn.

Without more contextual allegations, conclusory allegations fail to establish intent at the time of the promise.

Getting past scrutiny: logical inconsistency

Because promissory fraud claims involve a promise in exchange for some good or service, without the particularity requirement, courts worry that any breach of contract claim can become a promissory fraud claim. Practitioners must ask themselves, how is this fraud and not a breach of contract?

A properly pleaded promissory fraud claim focuses on contemporaneous facts, not hindsight. The complaint should explain why the promise was false when made. One way to do this is to identify logical inconsistencies between the promise and circumstances supporting the inference of fraudulent intent, such as inconsistent conduct, known inability to perform, or statements contradicting the promise.

Two cases illustrate these logical inconsistencies. In Tenzer v. Superscope, Inc., the corporation's chairman promised a board member a 10% finder's fee if the member could locate a buyer for corporate headquarters. Tenzer v. Superscope, Inc., 39 Cal.3d 18, 22 (1985). In reliance on the promise, the board member revealed the buyer's identity. The board member alleged that the chairman made the promise knowing that inside directors he controlled would block approval of the fee. Id. The court found these facts sufficient to raise triable issues of fraudulent intent.

Next, In Lazar v. Superior Court, 12 Cal.4th 631, 639 (1996), the employer promised a prospective hire that his position would be secure and that he would receive significant pay increases. But at the time of these promises, the employer was planning an operational merger that would eliminate the position and had a company policy limiting annual raises to 2% to 3%. The court found these allegations adequately stated a cause of action for promissory fraud.

In both examples, the plaintiffs alleged more than mere nonperformance. Practitioners should focus on contemporaneous facts, such as whether the promisor had a conflicting plan, lacked the financial or operational capacity to perform, or engaged in a pattern of similar broken promises suggesting a scheme rather than a change of heart.

The takeaway

Promissory fraud lives or dies on contemporaneous facts. The complaint must do more than recast a breach as fraud. Practitioners should identify facts showing the promise was false when made, such as inconsistent conduct, known inability to perform, or contradictory statements. Lead with specifics and dates, tie each allegation to intent at the time of the promise, and anticipate the argument that the claim is simply a repackaged breach.