Fraud

FRAUD IS A FORM OF THEFT in which dishonesty is calculated for advantage. It is theft that occurs when a thief has been able to successfully misrepresent some material fact(s). It involves the distortion or changing of the facts, or the truths connected with a business transaction, or a government transaction, so that the performance of a contract is actually a form of theft.

Fraud can also involve the wrongdoer in an act of masquerading his or her identity, so that the victim is fooled into a financial act that would not be performed if all of the facts were truly known. The result is that the victim of fraud is hurt by the terms of a contract that is misrepresented. In cases of fraud, the thief uses the confidence that has been placed in the thief by the person defrauded. The confidence is gained by the deliberate and intentional inducing of reliance upon representation of the material facts in the situation that allowed for the fraud to take place. Every year many millions of dollars are lost to fraud. The usual loss is money or property. Some victims of fraud are thrown into poverty as a result of the activity.

Fraud can occur in all kinds of businesses and industries, whether for-profit corporations, governmental agencies, or nonprofit organizations. It can also victimize consumers or individuals. There are numerous forms of fraud, some of which are not called fraud, but seduction, or other forms of injury to the innocent party that are the result of lies or misrepresentation presented by the thief.

The concept of fraud began in English common law. Some of the common types of fraud are lying on a contract, forgery, check fraud, counterfeiting, misuse of credit cards, falsifying of information, and personal misrepresentation. In addition fraud often occurs in sales transactions of goods, of securities, or of conveyances (transfers). It also occurs in the writing of wills, the abuse of trademarks and copyrights, the liability alleged in products, and even in obtaining consent for marriage. There have been cases where employers have been held liable for fraudulent action on the part of their employees. This rule may also be applied in cases of an agent who violates a trust even if the one who authorized him to act as a trustee was ignorant of his actions. Fraud can also occur because of a failure to speak. Instead of misrepresenting a material fact, the wrongdoer allows a misconception to go uncorrected. There have been cases where people are gullible, superstitious, or ignorant and become the victims of fraud. The courts have allowed them to recover damages even though the claims made by the wrongdoer were patently absurd and contrary to common public knowledge.

Fraud can have both civil and criminal consequences. In civil law fraud is the basis of the tort of misrepresentation. This form of tort is a civil action called deceit. The victim of fraud is entitled to recover not only losses but compensatory damages. It is usually based on one of three measures.

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