How to Prove Fraud
Fraud is a very popular claim in civil litigation, but it is one of the most difficult causes of action to prove in court. Many people think if someone tells them something that turns out to be untrue, they have an ironclad case of fraud, but it is not so simple. Though fraud can arise in a variety of situations, from business litigation to construction litigation and even professional malpractice litigation, in every case the person alleging fraud must be able to prove nine different elements by clear, cogent and convincing evidence. If you fail to prove even one element, the court will deny your claim.
The nine mandatory elements of fraud are: 1) someone made a statement of existing fact; 2) that fact was material in nature; 3) the statement about the fact was false; 4) the person making the statement knew it was false; 5) you did not know the statement was false; 6) the person making the statement wanted you to rely on their statement; 7) you had a right to rely on the statement; 8) you did rely on the statement; and 9) you were damaged as a result of relying on the statement.
First Element: Statement of Existing Fact
The statement that is the root of the fraud claim must be about a fact that currently exists. Therefore, it cannot be an opinion, and it cannot concern something that is going to happen in the future. A promise to do something in the future cannot give rise to a claim for fraud, even if the person never intended to follow through. Similarly, predictions of something that will happen and speculation about what may be true will not qualify as fraud.
Second Element: Materiality
A material fact is one that concerns the very substance of the transaction between the parties. It cannot be tangential or only remotely related, it has to be something that a reasonable person would believe is important to the relationship between the parties. Example: you are purchasing a shipment of apples, and the seller of those apples tells you that they will arrive in black boxes. But when you receive the apples, they are in gray boxes. The color of the boxes is not material to the shipment of apples. If the boxes showed up empty, that would be a material problem, but the color of their containers has no effect on the apples themselves. The seller’s representation that the boxes would be black cannot create a basis for a fraud claim.
Third Element: Falsity
This element speaks for itself. The fact must be false. If the statement is true, it cannot be fraudulent.
Fourth Element: Knowledge of Falsity
One of the most difficult elements to prove is that the person making the statement knew that it was false at the time the statement was made. Proving someone’s objective knowledge is very challenging, and you will need some corroborative evidence to show their knowledge at the relevant time. Texts or e-mails from the person that reveal they knew the statement to be false are usually the most effective type of proof, but you can also obtain testimony from third parties. Without such clear proof of the speaker’s actual knowledge, your fraud claim will run into a brick wall.
Fifth Element: Your Ignorance of the Falsity
Typically, this is an easy element to prove as it will rest almost entirely on your own representation of what you knew and did not know. However, if the opposing party can provide evidence that shows you knew or had reason to know, you may fail to prove this element.
Sixth Element: Intent to Rely
While intent is subjective and can be difficult to prove in much the same way that a person’s knowledge of truth or falsity can be challenging, if you have managed to successfully prove the first five elements then this sixth element can typically be assumed if the speaker is shown to have benefitted from your reliance on their representation. If they gain nothing from the false statement, then this element can be a challenge to prove unless you have direct evidence that demonstrates their intent (e.g. an e-mail from the speaker in which they admit to trying to deceive you).
Seventh and Eighth Elements: Justifiable and Actual Reliance
Whether you are justified in relying on the person’s statement can depend on a number of factors, including whether they had knowledge superior to yours, whether there was a simple way of determining that their statement was false, and whether the statements are directly contradicted by a written agreement. Salespeople and professionals are typically expected to have superior knowledge than their customers, patients, or clients. But if there is reason for you to have equal or superior knowledge, or if there are obvious reasons for you to distrust the speakers, your reliance may not be justified.
Actual reliance requires a showing that you objectively changed your position, that you acted or refrained from taking action, based on the person’s representation. This part is usually easy to prove. If the representation did not motivate you to do something, then you have no fraud claim.
Ninth Element: Damages
You must be able to prove actual monetary damages resulting from the false statement. The damages you will typically receive in a fraud claim is the difference between the value of the thing as represented and the value of the thing as it actually exists, but ultimately damages will vary from case to case depending on how you are harmed by your reliance on the false statement. If you cannot prove real harm, your fraud claim will fail.
Each of these elements must be proven by clear, cogent, and convincing evidence. This is a higher standard of proof than is typically required in civil litigation, so the evidence that you provide must go beyond making an element more probable than not. The trier of fact in your case has to be thoroughly persuaded that each element exists. If you are not able to prove any one of those elements clearly, cogently, and convincingly, you will not prove fraud.
If you believe you are the victim of fraud and you have clear, cogent and convincing evidence of each of the nine elements, the attorneys at Beresford Booth can help you. Please contact us at info@beresfordlaw.com or by phone at (425) 776-4100.