In its motion to set aside the default, Distributors asserts it had the goods at the time of contracting, and the parties discussed Distributors' difficult financial situation. If both of these statements are true, Stores will be unable to show that Distributors knowingly or recklessly made a false representation or that Stores' alleged reliance was reasonable. These two assertions, made in Distributors' affidavit, serve as a complete defense to the fraud claim. Distributors alleges that its failure to answer was not culpable. Distributors was under the impression that ongoing negotiations and the possibility of settlement obviated the need for prompt response.
Culpable conduct is more than mere negligence.
Wilfulness or bad faith is required. National Hockey League v. Metro. Default is not favored and doubt should be resolved in favor of setting aside a default and reaching a decision on the merits. The default will be set aside. The default will be set aside.