Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Course Subjects
  • Our Team
  • Home
  • Law, Transactions, & Risk Management
  • Legal Disputes - Civil & Criminal Law

Good Faith as a Defense to Fraud Charge - Explained

When is Good Faith a Defense to Fraud?

Written by Jason Gordon

Updated at April 2nd, 2023

Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Marketing, Advertising, Sales & PR
    Principles of Marketing Sales Advertising Public Relations SEO, Social Media, Direct Marketing
  • Accounting, Taxation, and Reporting
    Managerial & Financial Accounting & Reporting Business Taxation
  • 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
    Operations, Project, & Supply Chain Management Strategy, Entrepreneurship, & Innovation Business Ethics & Social Responsibility Global Business, International Law & Relations Business Communications & Negotiation Management, Leadership, & Organizational Behavior
  • Economics, Finance, & Analytics
    Economic Analysis & Monetary Policy Research, Quantitative Analysis, & Decision Science Investments, Trading, and Financial Markets Banking, Lending, and Credit Industry Business Finance, Personal Finance, and Valuation Principles
  • Courses
+ More

How does Good Faith affect fraud?

Fraud requires knowing and willful conduct carried out with the intent to defraud someone. As such, good faith in one's actions is a defense to the allegations. 

Next Article: Common Types of Business Fraud Back to: CRIMINAL LAW

When is Good Faith a Defense to Fraud?

The good faith defense is that the defendant acted in good faith and did not have the necessary intent to defraud anyone. 

It does not matter that a person's statement or belief is wrong, there is no action for fraud unless the intent is to deceive is present. 

Further, an individual's lack of due care in making a statement is not relevant in determining fraud.

Discussion Question

How do you feel about the mental intent requirement for a charge of fraud? Do you think a person should be able to escape a criminal fraud charge if she is reckless in her actions? What if she recognizes that her assertions are extremely unlikely, but she leads a customer or client to believe that the unlikely result is reasonably certain?

  • Some might argue that fraud and misrepresentation are one in the same. Misrepresentation has the same elements as fraud, without the element of knowingly deceiving another. A mistake of fact would constitute misrepresentation. Even recklessness, which is a conscious disregard of the probability of a negative result from one's actions, might be a defense against fraud. Actively understanding risk and misrepresenting a lower level of risk may still constitute fraud.

Practice Question

Mitchell owns a baseball card of Mickey Mantle. He believes that the card is an original rookie card. He offers to sell the card to Amy for $1,500. Amy buys the card. No long afterward, she has the card inspected and learns that it is simply a reproduction of the original card and is not worth any money. She is angry at Mitchell and asks your opinion on whether she should report the incident to the police. Has Mitchell committed fraud? Why or why not?

  • To demonstrate fraud, one must prove that there was intentional motive to deceive. Thus, where the party acted in good faith, their action will not qualify as fraud. Good faith is honesty in a persons conduct during an agreement. In the example from the practice question, Mitchell has not committed fraud because she was unaware of the correct value or state of the property she was selling. She only acted on the innocent understanding that the baseball card was an original rookie card. https://www.americanbar.org/groups/litigation/committees/business-torts-unfair-competition/practice/2016/duty-of-good-faith-fair-dealing/

Related Topics

  •  Criminal Law (Intro)
  • What is Criminal Law?
  • What are the elements of a crime?
  • Classifications of crimes Misdemeanor vs Felony Criminal Charges?
  • What is the process of bringing criminal charges?
  • Cease and Desist Order
  • What is the process for executing an arrest?
  • What are the exceptions to reading Miranda Rights?
  • What is the process for initiating criminal charges?
  • Prima Facie
  • What is the Arraignment and Initial Appearance
  • Investigation - Subpoena
  • Common Defenses to Criminal Conduct
  • Ex. Castle Doctrine
  • Types of Punishment for Criminal Activity
  • Theories Behind Criminal Punishment
  • Federal Sentencing Guidelines
  • What are the 4th Amendment protections against Search and Seizure?
  • What are the 5th Amendment criminal law protections?
  • What are the 6th Amendment criminal law protections?
  • What are the 8th Amendment criminal law protections?
  • Crimes Against the Property of Others
  • Activity Constituting Fraud
  • Good Faith as a Defense to Fraud
  • Common Types of Business Fraud
  • False Statement as a Criminal Charge
  • Conspiracy as a Criminal Charge
  • Obstruction of Justice as a Criminal Charge
  • Aiding and Abetting or Conspiracy to a Crime
  • What is a White Collar Crime?
  • Lone-back Method of Money Laundering
  • Defalcation
  • Kiting
  • Lapping Scheme
  • Whistleblower
  • Crimes or Conduct Endangering Workers
  • Bribery or Illegal Kickback as a Crime
  • Racketeer Influenced and Corrupt Organization Act
  • Racketeering
  • The False Claims Act
  • Sarbanes Oxley Act
  • What is Cyber Crime
  • Phishing
good faith good faith as defense fraud charge

Was this article helpful?

Yes
No

Related Articles

  • Criminal Law & Procedure - Explained
  • Exceptions to Reading Miranda Rights - Explained
  • Subject Matter Jurisdiction - Explained
  • Cyber Crime - Explained



©2011-2023. The Business Professor, LLC.
  • Privacy

  • Questions
  • Course Material

Definition by Author

0
0
Expand