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
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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?
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- 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
