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FRAUD, TO DEFRAUD
The term 'fraud' is generally defined in the law as an intentional
misrepresentation of material existing fact made by one person to another with
knowledge of its falsity and for the purpose of inducing the other person to
act, and upon which the other person relies with resulting injury or damage.
may also include an omission or intentional failure to state material
facts, knowledge of which would be necessary to make other statements not
To make a 'misrepresentation' simply means to state as a fact something which is
false or untrue. [To make a material 'omission' is to omit or withhold the
statement of a fact, knowledge of which is necessary to make other statements
Thus, to constitute fraud, a misrepresentation must be false [or an omission
must make other statements misleading], and it must be 'material' in the sense
that it relates to a matter of some importance or significance rather than a
minor or trivial detail.
To constitute fraud, a misrepresentation [or omission] must also relate to an
'existing fact.' Ordinarily, a promise to do something in the future does not
relate to an existing fact and cannot be the basis of a claim for fraud
the person who made the promise did so without any present intent to perform it
or with a positive intent not to perform it. Similarly, a mere expression of
opinion does not relate to an existing fact and cannot be the basis of a claim
unless the person stating the opinion has exclusive or superior
knowledge of existing facts which are inconsistent with such opinion.
To constitute fraud
the misrepresentation [or omission] must be made knowingly
and intentionally, not as a result of mistake or accident; that is, that the
person either knew or should have known of the falsity of the misrepresentation
[or the false effect of the omission], or that he made the misrepresentation [or
omission] in negligent disregard of its truth or falsity.
Finally to constitute fraud, the Plaintiff must prove that the Defendant
intended for the Plaintiff to rely upon the misrepresentation [and/or omission];
that the Plaintiff did in fact rely upon the misrepresentation [and/or
omission]; and that the Plaintiff suffered injury or damage as a result of the
In some cases [depending on the specifics of the case and the law] when it is
shown that a Defendant made a material misrepresentation [and/or omission] with
the intention that the Plaintiff rely upon it, then, under the law, the
Plaintiff may rely upon the truth of the representation, even though its falsity
could have been discovered had he made an investigation, unless he knows the
representation to be false or its falsity is obvious to him.
In other cases, when it is shown that a Defendant made a material
misrepresentation [and/or omission] with the intention that the Plaintiff rely
upon it, the Plaintiff must prove that his reliance was justified. If, in the
exercise of reasonable care for the protection of his own interests, the
Plaintiff could have learned the truth of the matter by making a reasonable
inquiry or investigation under the circumstances presented, but failed to do so,
then it cannot be said that he 'justifiably' relied upon such misrepresentations
For injury or damage to be the result of fraud, it must be shown that, except
for the fraud, the injury or damage would not have occurred.
The word 'material' means that the subject matter of the statement [or
concealment] related to a fact or circumstance which would be important to the
decision to be made as distinguished from an insignificant, trivial or
unimportant detail. (e.g. re: insurance fraud
to be material, an assertion [or concealment] must relate to a fact or
circumstance that would affect the liability of an insurer (if made during an
investigation of the loss), or would affect the decision to issue the policy, or
the amount of coverage or the premium (if made in the application for the
Torts. Unlawfully, designedly and knowingly, to appropriate the property of
another without criminal intent. For example:
1. Every appropriation of the right of property of another is not fraud. It must
be unlawful; that is to say, such an appropriation as is not permitted by law.
Property loaned may, during the time of the loan, be appropriated to the use of
the borrower. This is not fraud, because it is permitted by law.
2. The appropriation must be not only unlawful, but it must be made with a
knowledge that the property belongs to another and with a design to deprive him
of the same. It is unlawful to take the property of another; but if it be done
with a design of preserving it for the owners or if it be taken by mistake, it
is not done designedly or knowingly and, therefore, does not come within the
definition of fraud.
3. Every species of unlawful appropriation, not made with a criminal intent,
enters into this definition, when designedly made, with a knowledge that the
property is another's; therefore, such an appropriation, intended either for the
use of another or for the benefit of the offender himself, is comprehended by
4. Fraud, however immoral or illegal, is not in itself a crime or offence for
want of a criminal intent. It only becomes such in the cases provided by law.
Contracts, Torts. Any trick or artifice employed by one person to induce another
to fall into an error or to detain him in it, so that he may make an agreement
contrary to his interest. The fraud
may consist either, first, in the
misrepresentation or, secondly, in the concealment of a material fact. Fraud,
force and vexation, are odious in law. fraud
gives no action however, without
damage and in matters of contract it is merely a defence; it cannot in any case
constitute a new contract.
avoids a contract, ab initio, both at law and in equity, whether the
object be to deceive the public, third persons or one party endeavor thereby to
cheat the other.
The following is an enumeration of frauds for which equity will grant relief:
1. Fraud, dolus malus, may be actual, arising from facts and circumstances of
imposition, which is the plainest case;
2. It may be apparent from the intrinsic nature and subject of the bargain
itself; such as no man in his senses and not under delusion, would make on the
one hand and such as no honest and fair man would accept on the other, which are
inequitable and unconscientious bargains;
3. Fraud, which may be presumed from the circumstances and condition of the
4. Fraud, which may be collected and inferred in the consideration of a court of
equity, from the nature and circumstances of the transaction, as being an
imposition and deceit on other persons, not parties to the fraudulent agreement;
5. Fraud, in what are called catching bargains, with heirs, reversioners) or
expectants on the life of the parents. This last seems to fall under one or more
of the preceding divisions.
Frauds may be also divided into actual or positive and constructive frauds.
An actual or positive fraud
is the intentional and successful employment of any
cunning, deception or artifice used to circumvent, cheat or deceive another.
By constructive fraud
is meant such a contract or act, which, though not
originating in any actual evil design or contrivance to perpetrate a positive
or injury upon other persons, yet by its tendency to deceive or mislead
them or to violate private or public confidence or to impair or injure the
public interests, is deemed equally reprehensible with positive fraud
therefore is prohibited by law, as within the same reason and mischief as
contracts and acts done malo animo. Constructive frauds are such as are either
against public policy, in violation of some special confidence or trust or
operate substantially as a fraud
upon private right's, interests, duties or
intentions of third persons; or unconscientiously compromit or injuriously
affect the private interests, rights or duties of the parties themselves.
The civilians divide frauds into positive which consists in doing one's self or
causing another to do such things as induce a belief of the truth of what does
not exist, or negative, which consists in doing or dissimulating certain things
in order to induce the opposite party into error or to retain him there. The
intention to deceive, which is the characteristic of fraud, is here present.
is also divided into that which has induced the contract and incidental or
accidental fraud. The former is that which has been the cause or determining
motive of the contract, that without which the party defrauded would not have
contracted, when the artifices practised by one of the parties have been such
that it is evident that without them the other would not have contracted.
Incidental or accidental fraud
is that by which a person, otherwise determined
to contract, is deceived on some accessories or incidents of the contract; for
example, as to the quality of the object of the contract or its price so that he
has made a bad bargain. Accidental fraud
does not, according to the civilians,
avoid the contract but simply subjects the party to damages. It is otherwise
where the fraud
has been the determining cause of the contract; in that case the
contract is void.
Good faith, or in Latin bona fides (bona fide means "in good faith"), is
good, honest intention (even if producing unfortunate results) or belief. In
law, it is the mental and moral state of honesty, conviction as to the truth or
falsehood of a proposition or body of opinion, or as to the rectitude or
depravity of a line of conduct. This concept is important in law, especially
is defined as an intentional deception designed to obtain a benefit or
advantage or to cause some benefit that is due to be denied.