The False Representation or Concealment of a Present or Past Fact Must Be Deliberate

Fraud results from deliberate lies. It also results from deliberate concealment of unfavourable facts which otherwise could be noticed by a reasonable person. Generally neither seller nor buyer is obliged to reveal all good or bad facts about the subject matter of the contract. Courts would have trouble trying to define what must be known and disclosed in every case. Moreover, buyers are free to ask questions as they investigate before they buy. The seller must answer the questions honestly. If the seller refuses to answer a question, the buyer need not enter the contract. In addition, the seller must not give false information or act to prevent the other party from learning important facts.

To constitute fraud, the misrepresentation or concealment must be deliberate. Normally silence is not blameworthy. But sometimes fraud arises when the party has a duty to speak yet does not. For example, honesty requires a seller to tell about a concealed defect not readily discoverable by a buyer.

If a seller innocently misrepresents a material fact, the buyer may avoid the contract or collect compensatory damages for the injury suffered. However, no tort has been committed, so the buyer is not entitled to punitive damages. On the other hand, one may not claim fraud when the means were available for determining the truth, as by simply reading a paper before signing.

The false representation or concealment must be of a present or past fact. This does not include opinions of value or predictions. For example, if someone tells you that a certain article “will pay for itself”, “is a bargain”, “is the best on the market”, or “is a super value”, you have no legal right to rely upon such remarks. They are usually no more than statements of personal opinion (personal belief or judgment), not statements of fact. Opinions, which prove to be wrong, normally do not constitute fraud.

The Misrepresented or Concealed Fact Must Be Material

To be fraudulent, a statement must be a false representation or concealment of a present or past material fact. A fact is material, regardless of its apparent importance, if it influences the other person’s decision to enter into the agreement. Misrepresentation or concealment of such a fact usually means that the person who was misled would not have entered into the contract if he or she had known the truth.