11. What is “fraud”?
Fraud is the intentional misrepresentation of a material fact that is justifiably relied upon by someone to his or her injury. 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 one’s 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: 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 athlete’s retirement. If someone buys the poster based upon Daryl’s representations, is there a tortious act? Why or why not?