JUST WHAT IS FRAUD?
JUST WHAT IS FRAUD?
“Fraud” is one of those words that gets thrown around a lot. When something goes wrong in dealings with another person, and you feel like you weren’t treated fairly by the other person, you’re likely to assume what happened was fraud.
But in the law, fraud is a little more than you probably think it is. In fact, it is probably one of the hardest cases to prove. Why? Because it involves deciding what was going on in the other person’s mind when they said or did what they did. A person who does wrong is not likely to admit it out of his own mouth. So you have to find other ways to prove what he was thinking at the critical time.
So in the law, what constitutes fraud?
First, the person (or company through its agents or, maybe, its advertising) has to say something untrue. Second, and this is where it gets difficult, you have to prove that that person knew, when he made the statement, that it was untrue.
And sometimes it gets even harder because the statement in question is actually a non-statement. This is when the circumstances required that the person say something, and he doesn’t say it. This is called material omission, and it is also fraud. It’s just hard to prove. For instance, the owner of the used car had been told by his mechanic that the car only has a few hundred miles to go before it dies, and then the buyer asks if the car is drivable. If the owner responds that the car is just fine, this might be a material omission and, therefore, fraud.
Third, the person making the statement must know that the other person is relying on him for the truth. The car owner above knew that the buyer was relying on him, as the only person who knew the condition of the car, to tell the truth.
And there is another aspect to this reliance which also makes fraud hard to prove, namely, the person who relies on the statement must be justified in that reliance. For instance, if that buyer is a certified mechanic and would have been able to tell just by driving the car a few miles that something was not right, but he didn’t take the test drive, the reliance might not be justified.
Fourth, the misrepresentation, or the problem that was the subject of the misrepresentation, must be the proximate cause of the damage to the buyer. For instance, if the buyer takes the car and it is badly damaged in an accident before dying, the misrepresentation may not be the cause of the damage, or not all of it anyway. The accident would.
And finally, there must be damage to the buyer. There is no lawsuit if there is a misrepresentation but no damage is done. If the car ends up lasting for a good while, it may be that there was no damage from the misrepresentation.
One more thing . . . in Arizona, there is also a consumer fraud statute. It is a powerful weapon because it removes the reliance requirement. If someone lies, and that lie or the problem becomes the proximate cause of damage, there is a claim whether your reliance was reasonable or not.
The only problem is that the consumer fraud statute requires you to bring your action within one year from the time you discover or should have discovered that you’ve been lied to, as opposed to the three years you would have with non-statutory fraud.
Finally, because fraud is so complicated, do not try and litigate it without the help of a lawyer.