What Constitutes Fraud?

Generally, commercial fraud requires a statement of material fact, known to be false when made or made with reckless disregard of whether true or false. It must have been justifiably relied on, and caused damages to the person that relied on it.

Fraud may be a Defense to a Written Agreement

In many cases, fraud is used as a defense to a written agreement such as a lease. In that case, the remedy allows one to escape the consequences of the agreement rather than to collect money damages. Omitting to tell something may also be actionable depending on the relationship of the parties or what was said.

A landlord who wants to evict a tenant before the lease is up might charge the tenant with fraud, alleging that if the tenant had not told them fact X, they would not have signed the lease. Additionally, a tenant who was lied to by a landlord might want to escape the lease before the conclusion of its term.

The motivating factor for these claims can be different than what is alleged. If rent prices in the area have increased, the landlord may be motivated to seek a way to evict a current tenant to obtain a higher-paying tenant. Similarly, if the rent costs have declined, the tenant may seek to get out of the higher-priced lease. The presence of heavy equipment, specialized design, or the commercial importance of the location may provide the motivation for one party or the other to perceive that it has leverage enough to compel a modification. The lawsuit is then filed or threatened to start the conversation.

Fraud Cases are Difficult

Fraud cases can be difficult to win. The burden of proof is high. The courts often revert to the written document rather than statements allegedly made before the document was prepared. Nevertheless, awareness of what fraud is, how it can be alleged, and its potential uses offensively or defensively, remains important in these cases.

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If you have been a victim of fraud, please contact our office immediately.

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