## Facts

- Formosa undertook a major expansion project at its Point Comfort, Texas facility and solicited bids for construction of approximately 300 concrete foundations.
- Formosa’s bid package represented that the contractor would control scheduling, ordering, and delivery of materials (including owner-paid materials), that work would proceed continuously, and that the work would start July 16, 1990 and be completed in 90 days.
- Presidio’s president testified he relied on those representations when pricing the work; he added time for ordinary contingencies and bid based on a roughly 120-day project.
- Presidio was awarded the contract as the lowest bidder.
- Evidence showed that before performance began, Formosa had internally decided to control material ordering and delivery to reduce costs and to schedule multiple contractors in ways that would interfere with each other’s work.
- The work did not proceed continuously and took more than eight months; Presidio repeatedly complained of delays and sought compensation for delay-related costs.
- Presidio sued for breach of contract, fraudulent inducement, and fraud in performance; the jury found for Presidio on both contract and fraud and awarded actual and exemplary damages.
- After remittitur, Presidio elected tort recovery, and judgment was entered for actual fraud damages plus exemplary damages; the court of appeals affirmed.

## Issues

1. Whether a fraudulent inducement claim permits tort recovery (including exemplary damages) when the alleged injury is purely economic and arises from a contractual relationship.
2. Whether the evidence was legally sufficient to prove reliance and a compensable injury for fraudulent inducement.
3. Whether the evidence was legally sufficient to support the amount of actual fraud damages (and, consequently, exemplary damages).

## Decision

- The Supreme Court of Texas held that fraudulent inducement is an independent tort and is not barred by contract-only/economic-loss principles applicable to negligent failure to perform a contract.
- The Court held there was legally sufficient evidence that Formosa made material pre-contract representations intending Presidio to rely on them, and that Presidio relied when bidding and contracting.
- The Court held there was no probative evidence supporting the entire amount of actual fraud damages awarded.
- Because exemplary damages require a properly supported actual-damages award, the defect in actual damages required reversal of the exemplary award as well.
- The court of appeals’ judgment was reversed, and the case was remanded to the trial court for a new trial.

## Legal Principles

- Fraudulent inducement involves a duty not to make material misrepresentations to procure a contract; that duty is separate from duties created by the contract.
- Contract-based limitations on tort claims for negligent nonperformance do not preclude intentional tort liability for fraudulent inducement, even when the loss is purely economic.
- A fraud plaintiff must prove damages with competent evidence connecting the claimed losses to the misrepresentation; undifferentiated or unsupported damage calculations are legally insufficient.
- Exemplary damages depend on an underlying award of actual damages that is supported by legally sufficient evidence.

## Conclusion

Texas law permits tort and exemplary damages for fraudulent inducement despite a contractual relationship and economic loss, but a fraud judgment cannot stand where the evidence fails to provide probative support for the amount of actual damages awarded; the proper remedy is reversal and remand for a new trial.


Formosa Plastics Corp. USA v. Presidio Eng’rs & Contractors, Inc., 960 S.W.2d 41 (Tex. 1998)