There are as many different types of fraud as there are different types of crimes or misconduct: the number is limited only by the imagination of the wrongdoer.
As it relates to business litigation, fraud claims arise in familiar, regular contexts, including contract disputes; purchase agreements; real estate transactions; financial transactions; buy/sell agreements;
Because of the significant implications that arise when accusing someone of fraud, the statutes governing fraud claims mandate that the allegations be made with particularity because mere allegations of fraud are insufficient.
To establish a fraud claim, the Plaintiff must prove the Defendant:
- Made a representation of fact;
- Which was material;
- And was false;
- The false statement was known by the Defendant to be false;
- And made by the Defendant with the intent getting Plaintiff to rely upon it;
- Plaintiff did in fact rely upon the false statement of material fact;
- Plaintiff’s reliance was reasonable and in ignorance of the falsity;
- Plaintiff suffered damages as a result of the same.
As a result of the heightened pleading standard, the Plaintiff must provide factual specifics that correspond with some of the elements of the fraud cause of action, including specifying the statement or omission that the plaintiff contends is fraudulent; confirm who said; where it was said, when it was said, coupled with an explanation why the statements or omissions were false when made.
A viable fraud claim can be asserted by affirmative misrepresentation, by omission, or by fraudulent concealment. Each is a distinct cause of action with distinct elements of proof.
The significance of establishing a fraud claim is monumental. For example, a Plaintiff who is induced by a misrepresentation to execute a contract may: rescind the contract and sue to recover the dollar amount they provided in connection with the fraudulent contract; or affirm the contract, retain what the Plaintiff has received, and attempt to recover the damages it sustained as a result of the fraud.
One important caveat concerning fraud claims is that the proper measure of damages, known as the “out of pocket” rule. This awards the difference between the value of the bargain which a plaintiff was induced by fraud to make and the value of the consideration exacted as the price of the bargain. With fraud, unlike a breach of contract claim, damages are calculated upon what the plaintiff lost as a result of the fraud, and does not compensate the Plaintiff for what it might have gained – such as profits which could have been realized. Punitive damages may be viable as well.
Fraud cases are highly complex and intricate. Please contact our Long Island business fraud lawyers if you believe you’ve been frauded or accused of fraud.
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