Common law fraud is one of the most commonly claimed intentional torts in civil litigation cases. States throughout the country have enacted various fraud laws. Common law fraud, however, is a relatively old legal concept on which most of the statutory fraud laws are based on. While many states have created their own version of it, common law set the framework for the more modern day fraud statutes. Today, common law fraud is a claim in and of itself in New Jersey. It may give rise to other allegations, including violations of the consumer fraud act or breach of contract, but fraud itself is a very common cause of action.
Elements of Fraud
The basic concept of fraud is relatively simple. The Defendant lies, the Plaintiff believes the lie, and the Defendant benefits from the lie to the detriment of the Plaintiff. While it may seem straightforward, there are specific elements courts in New Jersey require a plaintiff to prove when bringing a fraud action. These include the following: (1) Misrepresentation of a Material Fact; (2) knowledge by the defendant of the falsehood; (3) intent of the defendant to induce reliance; (4) the plaintiff reasonably relief on the misrepresentation; and (5) plaintiff suffered damages as a result of their reliance.
The first element, misrepresentation of a material fact, could simply be described as the initial lie made by the Defendant. This means the Defendant either made a false statement or left out a crucial detail to the transaction in question. This could mean lying about the quality or value of goods, services, or a company.
The second element, knowledge of the falsehood, means that the Defendant must have known the statement was false at the time he was making the statement to the Plaintiff. This is crucial, as even if a Plaintiff can show the Defendant gave wrong information, the Plaintiff must also demonstrate that the Defendant knew it was false. A party cannot accidentally commit fraud.
The third element, intent to induce reliance, means that the Defendant must have intended for the Plaintiff to believe the lie. This means that the Defendant must have had the goal, when making the misrepresentation, for the Plaintiff to rely on the misrepresentation.
The fourth element, reasonable reliance on the part of the Plaintiff, goes hand in hand with the third. The Plaintiff must have had reason to rely on the false statement made by the Defendant. This could come from some special knowledge the Defendant is supposed to have that the average person might not have. This special knowledge could include a contractor’s knowledge on the construction process for a home, a doctor’s medical advice, or a car salesman’s knowledge on a vehicle. The idea is that the person making the misrepresentation has knowledge that the Plaintiff does not, and that led to the Plaintiff relying on the representation.
The fifth element, damages, is relatively easy to prove. This just means that, as a result of the misrepresentations of the Defendant, the Plaintiff suffered some sort of harm. This could be in having to contract with another party to complete the original job as contracted, or simply damages actually caused by the Defendant.
As an example, a Plaintiff homeowner contracts with a Defendant home improvement contractor for a home improvement contract, explicitly stating that Plaintiff wanted specific higher quality supplies to be used in this project. The Defendant contractor represents to the Plaintiff that the contractor intends to use these higher quality supplies. Plaintiff specifically enters into the contract with Defendant because of his alleged experience installing these higher quality supplies. Instead, Defendant has never actually installed these specialized supplies, and uses substantially lower quality supplies. Once Defendant has finished, Plaintiff is forced to pay another contractor to come in to remediate the work performed by the Defendant at twice the original contract cost. Is this fraud? It most definitely sounds like breach of contract, but is likely fraud as well. If the Plaintiff can demonstrate that the Defendant never intended to use the higher quality supplies, it likely arises to the level of fraud. The Plaintiff’s damages would be any amount that is more than what the original contract called for.
The New Jersey Consumer Fraud Act
While common law fraud claims are very common in New Jersey, our state also has some of the strongest consumer protection laws in the country. The New Jersey Consumer Fraud Act explicitly protects consumers from deceptive practices in the sales of goods and services. Specifically, the consumer fraud act has rules set for the auto industry, home improvement industry, health clubs and gyms, and employment agencies. If any of these specific merchants violate the New Jersey Consumer Fraud Act, they may be found liable for triple the amount of damages caused to the Plaintiff, paying the Plaintiff’s attorneys’ fees, in addition to any amounts found for common law fraud.
Dischargeability in Bankruptcy
In general, certain types of debt are not dischargeable in bankruptcy. This includes student loans, certain taxes, child support and alimony, and debt from certain types of fraud. If a Defendant is found liable for fraud in the state court, and proceeds to file for bankruptcy, it is likely that the court will find the debt incurred by the fraud non-dischargeable. Finding a debt non-dischargeable is done through an adversary proceeding in the bankruptcy court. If found non-dischargeable, the debt incurred from fraudulent actions will not be wiped away in the bankruptcy.
Conclusion
Whether you are being sued for fraud or believe you have a claim for fraud, it is important to know and understand your rights. It is crucial to have an experienced attorney on your side to help navigate the complicated facets of fraud claims.
