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Fraud
 What
is Fraud?
When
Fraud Occurs
Types
of Fraud
What
is Fraud?
Fraud
is either actual or constructive. Constructive
fraud arises when there is a confidential or fiduciary
relationship between the parties, but actual fraud
may arise regardless of any special relationship.
Distinguish fraud in the inducement and fraud
in the inception. The following discussion of
fraud is limited to "fraud in the inducement"
as contrasted with what is referred to as "fraud
in the inception."
When
Fraud Occurs
Fraud
in the inducement occurs when a person knows what
he or she is signing but consent is induced by
the fraud of another. Fraud in the inception happens
when a party is deceived concerning the nature
of his or her acts and does not know what he or
she has signed and does not intend to enter into
a contract. It occurs when, through the fraud
of another, a person is deceived as to the nature
of the contents of the document itself. When a
person who cannot read relies on the representation
of the other party's agent that a document is
merely a receipt and signs a release, it is "fraud
in the inception." Similarly, if the grantor of
a deed does not realize the nature of the instrument
being signed and, because of the fraud of another,
believes that it is not a deed, there is fraud
in the inception, and the deed is void. In both
cases, if the party signing the document knew
what he or she was signing, but relied on misrepresentations
when induced to sign it, there would be fraud
in the inducement.
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Types
of Fraud
There
are several types of fraud, and the elements of
proof are different for each type. Fraud consists
of any of the following, "committed by a party
to the contract, or with his connivance, with
intent to deceive another party thereto, or to
induce him to enter into the contract":
1.
"Intentional Fraud" is the suggestion,
as a fact, of that which is not true, by one who
does not believe it to be true.
2.
"Negligent Fraud" is the positive assertion,
in a manner not warranted by the information of
the person making it, of that which is not true,
though he or she believes it to be true.
3.
"Concealment" is the suppression of that
which is true, by one having knowledge or belief
of the fact and a duty to disclose the fact.
4. Promissory Fraud is a promise made without
the intent to perform.
5.
Innocent Misrepresentation is a misrepresentation
by one who believes it to be true and has reasonable
grounds to believe it is true. An innocent misrepresentation
is not actionable.
6.
General Fraud is any other act fitted to
deceive. Deceit is: (a) the suggestion, as a fact,
of that which is not true, by one who does not
believe it to be true; (b) the assertion, as a
fact, of that which is not true, by one who has
no reasonable ground for believing it to be true;
(c) the suppression of a fact, by one who is bound
to disclose it or who gives information of other
facts which are likely to mislead for want of
communication of that fact, or (d) a promise made
without any intention of performing. Distinguish
between fraud and deceit. The courts use the terms
"fraud" and "deceit" interchangeably and without
any expressed concern over a need to draw a distinction.
In most cases, when parties have a contractual
relationship, there is rarely any need to make
a distinction. However, the statutory definitions
are different, and this distinction may be material
in some cases, but both may coexist at the same
time.
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