Defining Fraud

> Most people think of fraud as a evil practice.  But “fraud” as used in law means simply action or lack of action that is punishable by law. Defining fraud is a task for the courts. WHAT IS FRAUD?  Fraud is defined by the legislature and the courts.  It includes outright deception, and sometimes almost “accidental” misrepresentation.  In some circumstances (like investments) fraud includes failure to disclose or to tell the whole truth.  Sometimes the law makes people like officers and directors and those who assist in furthering the fraud liable even if they did not know about the fraud. The definition of fraud has undergone change throughout the centuries.  The courts have always been careful to avoid defining fraud through a too rigid definition that would allow fraudulent practices to be without a remedy.  In the 19th century juries were often given the authority to determine fraud without the assistance of defining jury instruction.  The court was determining fraud on ad hoc based on the standard of the community (or the particular jury). Now fraud has come to be defined by courts generally to require an intentional misrepresentation that was properly relied upon by the plaintiff and caused the plaintiff damages. State law is influenced by the Restatement of Law published by nationally renown legal scholars.  Sometimes the states follow the Restatement position completely and sometimes they chose a state-specific variation.  The Restatement (Second) of Torts (1965) organizes the topic under Misrepresentation in four divisions: 1) Fraudulent Misrepresentation (Deceit); 2) Concealment and Non Disclosure; 3) Negligent Misrepresentation; and 4) Innocent Misrepresentation.  This represents a progression of mental culpability from intentional...