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Fraud

 

Basic Elements Of A Fraud Action

 

Deceit and fraud are defined separately in statutes. Deceit is defined in Civ. Code §§1709 and 1710, while fraud is defined in Civ. Code §§1572 (actual fraud) and 1573(constructive fraud). Liability for actual fraud under Civ. Code §1572is limited to acts committed by or with the connivance of a party to a contract with the intent to deceive another party to the contract and induce that party to enter into the contract.

 

Deceit: One who willfully deceives another with intent to induce the other to alter his or her position to his or her injury or risk is liable for any damage suffered as a result of the deceit. [Civ. Code §1709] There are four categories of deceit [Civ. Code §1710]:

  • the suggestion, as a fact, of that which is not true, by one who does not believe it to be true, commonly referred to as intentional misrepresentation;
  • the assertion, as a fact, of that which is not true, by one who has no reasonable ground for believing it to be true, commonly referred to as negligent misrepresentation;
  • the suppression of a fact, by one who is bound to disclose it or who gives information of other facts which are likely to mislead for want of communication of that fact, commonly referred to as concealment; and
  • a promise, made without any intention of performing it, commonly referred to as false promise.

 

Actual Fraud: Actual fraud consists of any of the following acts, committed by or with the connivance of a party to a contract with intent to deceive another party to the contract, or to induce the other party to enter into the contract [Civ. Code §1572]:

  • the suggestion, as a fact, of that which is not true, by one who does not believe it to be true;
  • the positive assertion, in any manner not warranted by the information of the person making it, of that which is not true, though the person making the assertion believes it to be true;
  • the suppression of that which is true, by one having knowledge or belief of the fact;
  • a promise made without any intention of performing it; and
  • any other act fitted to deceive.

 

Constructive Fraud: Constructive fraud consists of any breach of duty which, without actual fraudulent intent, gains an advantage to the person in fault, or any one claiming under the person in fault, by misleading another to the prejudice of the person misled, or to the prejudice of anyone claiming under the person misled. [Civ. Code §1573(1)] In addition, constructive fraud consists of any act or omission that the law specially declares to be fraudulent, without respect to actual fraud. [Civ. Code §1573(2)]

 

Election Of Remedies: A plaintiff who has entered into a contract in reliance on the fraud of a defendant may elect either the contract remedy, consisting of restitution based on rescission of the contract, or the tort remedy, by affirming the contract and seeking damages. A plaintiff can file a complaint stating causes of action in both contract and tort, but may be required to elect one remedy or the other at some time before judgment.