Fraud is a knowing, intentional misrepresentation or concealment of a material fact when the misrepresentation or concealment (omission) is done to induce another person or entity to act to their detriment—such as by paying money for a product or service or investing in a company, venture, or other proposition.
Fraud is usually a tort—a wrongful act for which a person or entity that is the victim of the fraud may file a civil (noncriminal) lawsuit and recover money damages. But fraud may also be a criminal offense (crime) prosecuted under various state and federal laws (usually statutes).
Laws vary from state to state, but to prevail on a civil fraud claim, a plaintiff generally must show:
• the defendant made a material representation that was false;
• the defendant knew the representation was false or made it recklessly as a positive assertion without any knowledge of its truth;
• the defendant intended to induce the plaintiff to act upon the representation; and
• the plaintiff actually and justifiably relied upon the representation and suffered injury as a result.
The fourth element has two requirements:
• the plaintiff must show that it actually relied on the defendant's representation; and
• such reliance was justifiable.
The law regarding civil fraud claims may be located in a state’s statutes or in its court opinions (common law or case law).
In Texas, fraud is recognized both as a tort for civil litigation and as a criminal offense. For a civil fraud claim, the plaintiff must prove that the defendant made a false material representation, knew of its falsity or was recklessly indifferent to its truth, intended to induce the plaintiff to rely on the representation, and that the plaintiff suffered damages as a result of actual and justifiable reliance on the representation. These elements align with the general requirements for fraud claims in many jurisdictions. Texas law, which can be found in statutes and case law, requires clear and convincing evidence to establish civil fraud. On the criminal side, fraud can be prosecuted under various statutes depending on the specific type of fraud committed, such as insurance fraud, credit card fraud, or securities fraud, and the penalties can range from fines to imprisonment. The Texas Penal Code outlines different fraudulent activities and the corresponding criminal charges and penalties.
