Fraud is commonly understood as dishonesty calculated for advantage. A
person who is dishonest may be called a fraud. In the U.S. legal
system, fraud is a specific offense with certain features.
Fraud is most common in the buying or selling of property, including real estate, Personal Property,
and intangible property, such as stocks, bonds, and copyrights. State
and federal statutes criminalize fraud, but not all cases rise to the
level of criminality. Prosecutors have discretion in determining which
cases to pursue. Victims may also seek redress in civil court.
Fraud
must be proved by showing that the defendant's actions involved five
separate elements: a false statement of a material fact,
knowledge on the part of the defendant that the statement is untrue,
intent on the part of the defendant to deceive the alleged victim,
justifiable reliance by the alleged victim on the statement, and
injury to the alleged victim as a result.
These elements contain
nuances that are not all easily proved. First, not all false statements
are fraudulent. To be fraudulent, a false statement must relate to a
material fact. It should also substantially affect a person's decision
to enter into a contract or pursue a certain course of action. A false
statement of fact that does not bear on the disputed transaction will
not be considered fraudulent.
Second, the defendant must know
that the statement is untrue. A statement of fact that is simply
mistaken is not fraudulent. To be fraudulent, a false statement must be
made with intent to deceive the victim. This is perhaps the easiest
element to prove, once falsity and materiality are proved, because most
material false statements are designed to mislead.
Third, the false statement must be made with the intent to deprive the victim of some legal right.
Fourth,
the victim's reliance on the false statement must be reasonable.
Reliance on a patently absurd false statement generally will not give
rise to fraud; however, people who are especially gullible,
superstitious, or ignorant or who are illiterate may recover damages for
fraud if the defendant knew and took advantage of their condition.
Finally,
the false statement must cause the victim some injury that leaves her
or him in a worse position than she or he was in before the fraud
