Cameron Miranda
Common law fraud is a legal theory that refers to false representation, dishonesty, and deceit. It can be a violation of civil or criminal law. In civil litigation, fraud is based on a misrepresentation of fact that is either intentional or negligent. A statement is considered intentional misrepresentation if the person making it knows it is false or is reckless as to its truth. The speaker must intend for the listener to rely on their statement, and the listener must then reasonably rely on the statement and be harmed as a result. Civil fraud is often a private action, whereas criminal fraud involves sufficient evidence to take the case to court.
| Characteristics | Values |
|---|---|
| Number of Elements | 9 |
| First Element | Representation of a fact |
| Fifth Element | Representer's intent to induce the other party to act in accordance with the representation |
| Seventh Element | Injured party's actual reliance on the truth of the representation |
| Purpose | Monetary gain or other benefits, such as obtaining a passport, travel document, or driver's license |
| Civil Law | A fraud victim may sue the fraud perpetrator to avoid the fraud or recover monetary compensation |
| Criminal Law | A fraud perpetrator may be prosecuted and imprisoned by governmental authorities |
| Civil Wrong | A government agency or person or entity harmed by fraud may bring litigation to stop the fraud, seek monetary damages, or both |
| Criminal Offence | Theft by false pretense |
| Statutory Fraud | Must relate to real estate or stock transactions |
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What You'll Learn
Misrepresentation of fact
There are three types of misrepresentation: innocent misrepresentation, negligent misrepresentation, and fraudulent misrepresentation. Innocent misrepresentation occurs when a party makes a false statement without knowing it to be untrue and with reasonable grounds for believing it to be true. In this case, the innocent party may have the right to cancel the contract, and the court has the discretion to award damages in lieu of rescission. Negligent misrepresentation occurs when a party makes a false statement without knowing it to be untrue but lacks reasonable grounds for believing it to be true. Finally, fraudulent misrepresentation occurs when a party makes an intentional or reckless misrepresentation of fact or opinion with the intention to coerce another party to act or refrain from acting based on that misrepresentation.
To prove fraudulent misrepresentation, the court will consider six factors:
- The defendant knew that the representation was false, or the defendant made the statement recklessly without knowledge of its truth.
- The misrepresentation was made with the intention that the plaintiff would rely on it.
- The plaintiff did rely on the misrepresentation.
- The plaintiff suffered harm as a result of the misrepresentation.
- The plaintiff's actual reliance on the misrepresentation.
- The standard remedy for fraudulent misrepresentation is damages, including punitive damages to punish or deter the misconduct.
In summary, misrepresentation of fact is a critical aspect of common law fraud, and fraudulent misrepresentation, in particular, can have significant legal consequences, including monetary damages and punitive measures.
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Intent to induce action
The intent to induce action is a critical aspect of common law fraud, encompassing the misrepresentation of facts or deceitful conduct aimed at influencing another party's behaviour. This element is encapsulated in the legal concept of "representation," which refers to any action or conduct that creates a distinct impression of fact, with the intention to induce someone to act.
The case of St. Louis & S. F. R. Co. v. Reed (1913) illustrates this principle, where a defendant's issuance of a certificate stating the weight of scrap metal in the plaintiff's truck was deemed a representation. Here, the defendant's action went beyond a mere warranty and created a specific impression of fact, intending to influence the plaintiff's behaviour.
In the context of common law fraud, the intent to induce action is closely tied to the misrepresentation of facts. For instance, in Estate of Schwarz v. Philip Morris, Inc. (2006), the court emphasised that fraud fundamentally involves "the communication of a misimpression to induce another to rely on it." This highlights the interplay between misrepresentation and the intent to induce reliance on the part of the affected party.
Furthermore, the intent to induce action is a distinguishing factor between intentional and negligent misrepresentation. In the former, the person making the statement knows it is false or acts with reckless disregard for its truth, intending for the other party to rely on it. Conversely, negligent misrepresentation involves the speaker actually believing the statement to be true, despite lacking reasonable grounds for that belief.
The intent to induce action is a pivotal element in establishing common law fraud, as it underscores the deliberate nature of the misrepresentation or deceitful conduct. This element sets the foundation for assessing the fraudster's intention to deceive or induce reliance, which is often the most challenging aspect to prove in fraud cases.
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Actual reliance on representation
Common law fraud is a complex area of law that can be difficult to prove in court. The intention to defraud is the key element in question, and the evidentiary burden is high.
Direct proof of reliance is not always necessary to establish actual reliance. In some cases, reliance can be inferred from circumstantial evidence. For example, in Zimmerman v. Loose, the court held that "fraud may be inferred from circumstantial evidence" and that direct proof of reliance is not required to establish common law fraud. Similarly, in Denbo v. Badger, the court found that a party need not specifically allege that they had a right to rely on representations; instead, this element could be determined from the facts of the case.
However, in most cases, the plaintiff must allege specific actions that indicate they actually relied on the misrepresentations. For example, in Fritz Cos., Inc. v. Superior Court, the court held that the plaintiff must allege specific actions or decisions that demonstrate actual reliance on the misrepresentations. This means that the plaintiff must have taken some action or made a decision based on the misrepresentation for actual reliance to be established.
In conclusion, actual reliance on representation is a critical element of common law fraud, and while direct proof of reliance is not always required, the plaintiff must generally demonstrate specific actions or decisions made in reliance on the misrepresentation. This element is crucial in establishing the causal link between the misrepresentation and the plaintiff's harm.
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Criminal vs civil fraud
Fraud is a legal wrong that can be both a civil and criminal offence. In civil litigation, allegations of fraud are based on a misrepresentation of fact that is either intentional or negligent. For a statement to be an intentional misrepresentation, the person making it must have known it was false or been reckless as to its truth. The speaker must have intended for the other party to rely on their statement, and the other party must have reasonably relied on it and been harmed as a result.
Civil fraud cases are brought to court by the person who was defrauded, who must prove that the defendant materially misrepresented the fact, that the fact was false, and that they knew it was false. They must also prove that the defendant intended for them to act on the misrepresentation and that they acted reasonably in believing it. The victim must also show that they suffered damage as a result. The punishment sought in civil fraud cases is generally compensation for the damage suffered by the victim.
Criminal fraud is prosecuted by the state, and the case is brought by local, state, or federal prosecutors. These cases can be pursued even if the fraud was unsuccessful and nobody was harmed. Common examples include bankruptcy fraud, credit card fraud, and healthcare fraud. Criminal fraud may result in incarceration, probation, fines, and restitution to victims.
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Fraudulent intent
In the context of common law fraud, the representer intends to induce the other party to act in accordance with the representation. This is often referred to as the "fundamental character of fraud", where a misimpression is communicated to induce another to rely on it.
Furthermore, the injured party's actual reliance on the truth of the representation is crucial. This means that the misrepresentation directly caused the plaintiff's conduct, altering their legal relations. Proving this reliance can be challenging, as it requires demonstrating that the plaintiff would not have entered into the contract or transaction without such a representation.
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