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Fraud is commonly understood as dishonesty calculated for advantage.
Fraud must be proved by showing that the defendant's actions involved five separate elements:
(1) a false statement of a material fact,
(2) knowledge on the part of the defendant that the statement is untrue,
(3) intent on the part of the defendant to deceive the alleged victim,
(4) justifiable reliance by the alleged victim on the statement, and
(5) injury to the alleged victim as a result.
These elements contain nuances that are not all easily proved. Fraud must be plead with specifity and with facts showing such.
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.
A statement of belief is not a statement of fact and thus is not fraudulent. Puffing, or the expression of a glowing opinion by a seller, is likewise not fraudulent. For example, a car dealer may represent that a particular vehicle is "the finest in the lot." Although the statement may not be true, it is not a statement of fact, and a reasonable buyer would not be justified in relying on it.
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