What is fraud? Oftentimes people or business entities are mislead into entering into agreements. Either they were induced into a contract because facts were omitted or the facts were misrepresented.
Under New York law, there are 4 elements of fraud that would cause action:
- The making of a statement and the misrepresentation or omission of material facts.
A statement must be made. A statement of opinion cannot support any claims of fraud. This statement must misrepresent facts. For example, if the defendant sold a company to the plaintiff based on the fact that the company had X amount of profit and this was a misrepresentation, then the plaintiff would have grounds to support a claim of fraud.
A claim of fraud can also be supported if there was an omission of crucial material facts. For example, if the defendant failed to disclose major risks or costs related to transactions.
- The falsity and the intention to deceive and induce reliance.
There must be falsity of representation. A plaintiff must also present factual evidence showing the defendant had the intention to deceive or was reckless in their ignorance of its truth. Proving intention is one of the most difficult parts of cases of fraud. Many litigation attorneys look to the circumstances of the agreements to find the defendant's intent.
- A justifiable reliance.
There must be reasonable reliance. If the plaintiff could have reasonably discovered the misrepresentation of facts through searching publically available records then the reliance may not be deemed reasonable.
- Damages and injuries sustained from reliance.
These damages cannot be speculative, they must be support by documents and evidence. If a company that had a solid track record was defrauded by a contract it would have a much easier time proving damages than a startup company with no track record facing a similar situation.