Fraud - Explained
An Intentional Falsehood Used to Extract Value
Written by Jason Gordon
Updated at April 4th, 2023
- Marketing, Advertising, Sales & PR
- Accounting, Taxation, and Reporting
- Professionalism & Career Development
-
Law, Transactions, & Risk Management
Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
- Business Management & Operations
- Economics, Finance, & Analytics
- Courses
What is Fraud?
Fraud is the intentional misrepresentation of a material fact that is justifiably relied upon by someone to his or her injury.
Next Article: Intentional Interference with Contractual Relations Return to: TORT LAW
What Type of Conduct Constitutes Fraud?
The false statement inducing the other party's misunderstanding must regard a material fact about the prospective transaction. Fraud often involves intentional misrepresentations regarding ownership of property or ones financial status.
- Note: Fraud may be an intentional failure to disclose a material fact that induces another into action which results in her harm. This may be the case when a legal duty to disclose the material fact exists.
- Example: Lying about assets or liabilities in order to get credit or a loan is a common form of fraud.
Discussion Question
How do feel about the requirement that fraud be intentional? Should a misrepresentation that is reckless and unverified be considered fraudulent, even if it is not intentional? Why or why not?
Practice Question
Daryl is selling a poster bearing the signature of a known celebrity athlete. Daryl advertises that the poster is 15-years old and was signed when the athlete was a rookie. In reality, the poster was signed recently, following the athletes retirement. If someone buys the poster based upon Daryl's representations, is there a tortious act? Why or why not?
- Fraud refers to the use any intentional deception to secure unfair or unlawful gain, or to deprive a victim of a legal right. The courts will typically find that a defendant has committed fraudulent misrepresentation when the following six factors have been met:
- A statement or representation was made.
- The statement or representation was false.
- That when made, the defendant knew that the statement or representation was false or that the defendant made the statement recklessly without knowledge of its truth.
- That the fraudulent misrepresentations was made with the intention that the plaintiff would rely or act on it.
- That the plaintiff suffered harm as a result of the fraudulent misrepresentation.
Related Topics
- Tort Law (Intro)
- What are Torts?
- What are the types of torts?
- What are Intentional Torts?
- Unintentional Tort
- Assault and Battery?
- Intentional Infliction of Emotions Distress?
- Invasion of Privacy?
- False Imprisonment?
- Malicious Prosecution?
- Trespass?
- Conversion?
- Defamation?
- Defenses to Defamation?
- Absolute Privilege
- Defamation and 1st Amendment Considerations?
- Fraud?
- Intentional Interference with Contractual Relations?
- What is Negligence?
- Negligence A Duty of Care?
- Negligence Breach of Duty of Care?
- Causation?
- Cause-in-Fact
- What are common defenses to negligence actions?
- What is Strict Liability?
- Strict Liability Causes of Action Examples
- Strict Products Liability
- What defenses exist to strict product liability actions?
- Compensatory damages?
- Punitive damages?
- Treble Damages