WHAT CONSTITUTES FRAUD IN CALIFORNIA

In California, a cause of action for fraud can arise when a party misrepresents material facts, makes false promises, or otherwise deceives another party with the intention of depriving them of their money, property, and/or rights. Fraud and deceit are generally defined in California Civil Code Sections 1572, 1709, and 1710. Following are the types of fraud claims permitted under California law.

Intentional Misrepresentation

Intentional misrepresentation occurs when a party intentionally convinces another party to rely on false assertions of fact, which the other party reasonably relies on and sustains damages therefrom.

Intentional misrepresentation requires the following elements:

• A party makes a false statement of fact knowing the statement is not true.  Statements of opinion or general embellishment, like a salesperson bragging about a product they wish to sell, is permitted, even if the opinion exaggerates the product’s performance or benefits. See Hauter v. Zogarts (1975) 14 Cal. 3d 104, 112.
•  There was an intent by the party making the false statement to defraud another party with the false statement.
•  The other party reasonably relied on the false statement, which was a substantial factor in causing harm to them.
•   The other party suffered damages as an actual and proximate result of the intentional misrepresentation.

Negligent Misrepresentation

•  A party makes a false statement of fact to another party, with no reasonable basis for believing the statement is true (as determined by a judge or jury), even if the party making the statement believes it is true.
•  The party making the false statement intended that the other party rely on the misrepresentation of fact.
•  The other party did reasonably rely on the false statement, which was a substantial factor in causing harm to them.
•  The other party suffered damages as an actual and proximate result of the negligent misrepresentation.

Concealment

•  A party had a fiduciary relationship with another party, which imposed a duty to disclose facts, but the party did not disclose such facts. Such fiduciary relationships are imposed by law upon business partners, trustees, licensed professionals and others.
•  The party accused of concealment either:

a) Intentionally failed to disclose certain facts; or

b) Disclosed some facts but failed to disclose other facts, making the disclosure deceptive; or

c) Intentionally failed to disclose certain facts that were known only to the concealing party, and that the                            other party could not have discovered; or

d) Prevented the other party from discovering certain facts.

•  In failing to disclose certain facts, the concealing party intended to deceive the other party.
•  The other party was not aware of the concealed facts, and had they been aware, they reasonably would have behaved differently.
•  The other party suffered harm and the concealment was a substantial factor in causing such harm.

False Promise

False promise fraud requires the following:

•  A party makes a promise which they do not intend to perform at the time they make the promise.
•  The party making the promise intended that the other party would rely on the promise, and the other party did, in fact, reasonably rely on the promise.
•  The party making the promise does not fulfill that promise.
•  The other party suffered harm and the false statement was a substantial factor in causing such harm.

Summary

Asserting a viable claim of fraud based on any of these theories can open the door to substantially larger damage awards than most breach of contract claims, or can provide additional leverage to the party asserting them in an effort to negotiate a prompt settlement. This is primarily due to the availability of punitive damages for proving fraud. Punitive damages are meant to punish the wrongdoer and are often based on a percentage of the wrongdoer’s revenue, which is otherwise not considered in awarding damages.

If you are engaged in a dispute involving fraud or alleged fraud, the trusted and highly experienced litigation attorneys at Gehres Law Group can provide valuable insights and skilled representation. Contact us today for your complimentary consultation.

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