There are three categories of fraud. They categories are:
- Intentional Misrepresentation. Fraud happens when another person gains something of value, usually money or property, from a victim by knowingly making a false statement to induce you to do something.
- False Promise. A promise without the intent to keep the promise.
- Fraud by Omission. An important fact was omitted which induced you to do something.
What is Fraud?
Fraud or deceit occurs when a party “willfully deceives another with the intent to induce him to alter his position to his injury or risk.” 
In other words, fraud occurs when one person successfully tricks another to make the other person do something to their own detriment.
1:20 Fraud Law
The defendant (the party who is not bringing the complaint) must have made a misrepresentation consisting of either:
- An affirmative misrepresentation:
- the suggestion, as a fact, of that which is not true by one who does not believe it to be true;
- Concealment or half-truth:
- the suppression of a fact, by one who is bound to disclose it or who gives information of other facts which are likely to mislead for want of communication of that fact; or
- A false promise:
- a promise made without any intention of performing it. 
1:22 What is Material Fact?
The misrepresentation must be of a material fact essential to the analysis, undertaken by the plaintiff and such that the plaintiff would not have acted as he did without it. 
So let’s go through the elements one by one:
- The misrepresentation (for example, a false statement) must be:
- of a material fact (important fact)
- essential to the analysis (critical fact in the situation)
- undertaken by the plaintiff (the plaintiff acted on the statement)
- and such that the plaintiff would not have acted as he did without it (if the plaintiff never heard the misrepresentation, he would not have acted in that way).
1:23 Knowledge of Falsity
The misrepresentation must be:
- made by someone who knows that the statement is false
- or made by someone who knows that they are concealing an essential fact. 
1:24 Intent to Induce Reliance
- The defendant (the party who is not bringing the complaint) must intend to make the plaintiff change their position to their own detriment or risk.
- The intent to defraud or deceive is not necessary.
- The plaintiff must only prove that the opposite party wanted to cause the plaintiff to change his position to his own disadvantage. 
- Therefore, the plaintiff doesn’t necessarily need to prove “fraud”.
1:25 Justifiable Reliance
The plaintiff must actually and justifiably or reasonably rely on the defendant’s misrepresentation. In other words, the plaintiff must show that it is justified that he was tricked by the defendant.
- To reasonably rely on the defendant’s misrepresentation, the plaintiff must only show that a reasonable person in the same situation would also have relied on the defendant’s false statement.
1:26 Causation and Damage
Reliance on the misrepresentation must cause plaintiff damage (financial, physical, emotional). Misrepresentations without damage will not support a claim in court.
The misrepresentation must be the proximate cause of the damage. 
- Proximate cause = the damage would not have occurred had it not been for the defendant’s false representation.
The standard of proof requires that the party claiming fraud must prove the elements of the claim. 
- A standard of proof is needed to prove a claim in court.
The claim must be proven by a preponderance of the evidence. 
- The preponderance of the evidence = more likely than not.
- A claim must show that due to the defendant’s wrongdoing, it is more likely than not that such damage would have occurred.
- Fraud is a broad term that includes any means in which a person can deceive another person to get an advantage over the other at the other’s own disadvantage.
- There is a definite rule to define fraud. Fraud includes all surprise, trick, cunning, dissembling, and unfair ways by which another is deceived.
- In general, the concept of fraud embraces anything that is intended to deceive.
- This includes all statements, acts, concealments, and omissions.
- Involving a breach of legal or equitable duty, trust or confidence.
- Which results in injury to one who justifiably relies on the false statement.
1:31a Affirmative Misrepresentation
- Affirmative misrepresentation =
- single false statement regarding an essential fact
- made with the intent to defraud
- and relied upon by another party
These factors of an affirmative misrepresentation support an action for fraud in court. 
- True statements can form the basis of false representations
- only if they are made in a manner designed to create a false impression and were so acted on under the belief that they were true. 
- A misrepresentation need not be obvious in speech or action.
- A misrepresentation may be implied or inferred from the circumstances. 
- To avoid affirmative misrepresentation –
- If a person voluntarily offers information or responds to a question MUST speak truly.
- That person must avoid suppressing into that he or she knows would change the circumstance.
Intentional deceit can either be a spoken or written statement (affirmative false representation)
- or the failure to disclose that a statement is true (and would change the circumstance).
- An affirmative false representation
- or knowing concealment of information material to the circumstance
- will provide the necessary misrepresentation element to hold in court. 
- Deceit may be negative as well as affirmative
- Deceit can arise out of the suppression of information that should have been revealed, OR by stating false information. 
Stating a dishonest opinion to someone who will reasonably rely on it will for a basis of deceit in court.
- “Under certain circumstances, expressions of professional opinion are treated as representations of fact.
A party makes a positive assertion of fact when they affirm an essential fact that was stated.
- It is not a positive assertion of fact when someone just makes a casual expression of belief.
A person with superior knowledge/expertise:
- When a person has superior knowledge or expertise regarding a statement then their statement will be considered a material fact.
- if a doctor (someone containing expertise) tells a patient a diagnosis then that would be a “material fact””
- Dishonest opinions:
- when expressed by a defendant with apparent superior knowledge (like a doctor) are actionable in tort as misrepresentations. 
How will the court avoid finding deceit?
- If the party making an opinion truly believes that they are telling the truth.
1:31d False Promise
Deceit may consist of a promise, made without the intention of performing it.
A promise to do something implies that whoever makes that promise actually has an intention to perform it.
- When someone makes a FALSE promise, on the other hand, then they know they make a promise without any intention of performing it.
- Therefore, a false promise includes an implied misrepresentation.
1:32 Important (Material) Fact
The false statement/misrepresentation must be important enough that, had it not been made, then no damage would have occurred. 
- The fact spoken or hidden is deemed material/essential if:
- if it relates to an important
- and directly affects the purpose for which the wronged party acted. 
- A plaintiff will be unable to show materiality or causation
- if he could have done nothing to improve his position, if had he known that the representation was false. 
1:33 Knowledge of Falsity
A defendant may be liable for deceit even if they do not KNOW that their statement was false IF:
- The other party can prove that the defendant had a “reckless disregard for the truth”.
- The misrepresentation MUST have been made by someone who KNEW that it may be untrue.
- When a party who KNOWS that information is not true yet still offers it up to the other party. 
1:34 Intent to Induce Reliance
The plaintiff must prove that the defendant acted to cause a change of position and to induce action on the part of the party claiming fraud.
- The essential element in a suit for deceit is not the intent to defraud.
- The vital element of the claim is the defendant’s intent to induce action by another in response to a misrepresentation. 
Inference can establish intent.
- You can interfere intent from the acts of the parties
- Direct proof of intent for fraud is often impossible to find 
There is no deceit if…
- If a defendant made a misrepresentation but had no intent to induce the plaintiff’s reliance on the statement
- There is no deceit even if the plaintiff relied on the misrepresentation
- The defendant is not liable for intentional deceit for unintended consequences. 
To state the cause of action for fraud under Civil Code §1572, the defendant must have intended that the plaintiff relies on the statement. 
Under Civil Code §1572 a defense of fraud occurs when…
- a party to a contract misrepresents or conceals information to induce someone to enter into a contract. 
1:35 Justifiable Reliance
To seek relief from intentional deceit you…
- Must prove that the party actually relied on the defendant’s misrepresentation.
Actual reliance occurs…
- when a misrepresentation is an immediate cause of the plaintiff’s conduct
- and which, if it were not for the misrepresentation, he would not have engaged in the activity in all. 
Relief will not be granted if the plaintiff placed too much confidence in the person defrauding him.
How will the court consider if the plaintiff’s reliance was reasonable?
- The court will consider the plaintiff’s knowledge and the relevant information available to him at the time
- The court will also consider his intelligence and relative sophistication
Reliance may be proven by:
- circumstantial evidence,
- or by direct evidence.
The court will presume there was reliance if the defendant made a statement and the plaintiff later acted upon it. 
How to determine the reasonableness of plaintiff’s reliance:
- case-by-case basis, (the court will evaluate all cases individually)
- considering the representation’s actual effect on the plaintiff. 
If fraudulent deceit is proven then the defendant is liable to the plaintiff “for any damage which he thereby suffers.” 
Damage recovery is limited to those consequences that the defendant could reasonably foresee when making the misrepresentation. 
Here are all the possible damages for which a plaintiff can seek recovery:
- Compensatory Damages 
- Money is awarded to the wronged party for the loss they suffered (financial loss such as hospital bills, loss of wages, loss of business)
- Consequential Damages 
- Money is awarded to the wronged party because the defendant failed to meet a contractual obligation.
- Emotional Distress Damages 
- Money is awarded to the wronged party because of the negative psychological impact the fraud had on the plaintiff (can’t sleep, anxiety, depression).
- Note – emotional distress is usually very hard to prove in court
- Rescission 
- Because of the fraud, the wronged party is allowed to cancel a contract that they signed with the defendant
- If they were forced to carry out the contract, it would result in damage.
- The wronged party can change the contract to avoid damage
- Restitution 
- If the defendant gained anything because of his fraud, then he is required to give it back to the plaintiff.
- Injunctive Relief 
- If the defendant used fraud to force the plaintiff into acting a certain way, this prevents the plaintiff from having to carry out that action.
- Rather than getting financial damages, the court will order the defendant to stop acting in a certain way
- Prejudgment Interest on Damages 
- When a court case takes a long time and the court knows that the wronged party would win financial damages
- The court awards money that would constitute the interest on the award
- The plaintiff would make an interest in the total award they would receive at the end of the case.
- Punitive damages (when a judge orders a defendant financial damage to teach him a lesson) are not limited to affirmative misrepresentations.
- Intentional concealment of material fact may also result in punitive damages
1:50 TIME LIMITATION TO FILE A FRAUD LAWSUIT
The statute of limitations for deceit is three years.
- A plaintiff has 3 years to bring a claim to court.
- The timer goes off when the damaged party discovers that they were defrauded.
- The 3 years do not begin after the damage occurred, but rather after the plaintiff realized that he was defrauded.
- Any claim brought after the limited 3 years will be thrown out by the court.
However, if there is a delayed discovery from the time the damage occurred to the time a plaintiff has realized the fraud
- The plaintiff must show the court the reasons for his delayed discovery of fraud.
The plaintiff must plead and prove facts showing
(a) lack of knowledge;
(b) lack of means of obtaining knowledge, or why the facts could not have been discovered at an earlier date through reasonable diligence;
(c) how and when the plaintiff actually did discover the fraud or mistake
1:60 AFFIRMATIVE DEFENSES
- Statute of Limitations (see above).
- A defendant may defend themselves by stating that the plaintiff brought their claim too late (after the allowed 3-year period).
- Waiver 
- When a plaintiff signs a contract that contains a waiver of a right…
- The defendant can use this waiver as a defense to show that the plaintiff has given up his right to any damages.
 Cal. Civ. Code §1709.
 Cal. Civ. Code §1710; see also Cal. Civ. Code §1572.
 Roddenberry v. Roddenberry, 44 Cal. App. 4th 634, 665, 51 Cal. Rptr. 2d 907 (1996).
 Cicone v. URS Corp., 183 Cal. App. 3d 194, 227 Cal. Rptr. 887 (1986); Block v. Tobin, 45 Cal. App. 3d 214, 219, 119 Cal. Rptr. 288 (1975). This element distinguishes intentional deceit from the related tort of negligent misrepresentation. Gagne v. Bertran, 43 Cal. 2d 481, 487-88, 275 P.2d 15 (1954); see §V.2:00 (Negligent Misrepresentation).
 Cal. Civ. Code §1710.
 Nathanson v. Murphy, 132 Cal. App. 2d 363, 369-70, 282 P.2d 174 (1955); see also Cal. Civ. Code §1572 (fraud in the context of a contract requires the intent to deceive a party to a contract, or to induce a party to enter into the contract).
 Conrad v. Bank of America, 45 Cal. App. 4th 133, 157, 53 Cal. Rptr. 2d 336 (1996).
 Nagy v. Nagy, 210 Cal. App. 3d 1262, 1268, 258 Cal. Rptr. 787 (1989); Wildey v. Seaver, 111 Cal. App. 565, 568, 295 P. 844 (1931).
GN Mortgage Corp. v. Fidelity Nat’l Title Ins. Co., 21 Cal. App. 4th 1802, 1807-08, 27 Cal. Rptr. 2d 47 (1994).
 Doctor v. Lakeridge Construction Co., 252 Cal. App. 2d 715, 718, 60 Cal. Rptr. 824 (1967).
 Liodas v. Sahadi, 19 Cal. 3d 278, 290, 137 Cal. Rptr. 635 (1977).
 Wells v. Zenz, 83 Cal. App. 137, 140, 256 P. 484 (1927).
 Pearson v. Norton, 230 Cal. App. 2d 1, 7, 40 Cal. Rptr. 634 (1964).
 Sears v. Myerson, 106 Cal. App. 220, 222-23, 289 P. 173 (1930).
 Smith v. Brown, 59 Cal. App. 2d 836, 838, 140 P.2d 86 (1943).
 Universal By-Products, Inc. v. City of Modesto, 43 Cal. App. 3d 145, 151, 117 Cal. Rptr. 525 (1974).
 Wice v. Schilling, 124 Cal. App. 2d 735, 745, 269 P.2d 231 (1954).
 Cal. Civ. Code §1572; Gonsalves v. Hodgson, 38 Cal. 2d 91, 237 P.2d 656 (1951); Roddenberry v. Roddenberry, 44 Cal. App. 4th 634, 666, 51 Cal. Rptr. 2d 907 (1996); Lingsch v. Savage, 213 Cal. App. 2d 729, 60 Cal. Rptr. 824 (1963).
 Agnew v. Cronin, 148 Cal. App. 2d 117, 129-130, 306 P.2d 527, 534 (1957).
 Gillespie v. Ormsby, 126 Cal. App. 2d 513, 527, 272 P.2d 949 (1954).
 Anderson v. Deloitte & Touche, 56 Cal. App. 4th 1468, 1476, 66 Cal. Rptr. 2d 512 (1997) (citations omitted).
 Harazim v. Lynam, 267 Cal. App. 2d 127, 132, 72 Cal. Rptr. 670 (1968).
 Anderson v. Thacher, 76 Cal. App. 2d 50, 65-71, 172 P.2d 533 (1946).
 Cal. Civ. Code §1710(4).
 Lazar v. Superior Court, 12 Cal. 4th 631, 638, 49 Cal. Rptr. 2d 377 (1996).
 Andrew v. Bankers & Shippers Ins. Co., 101 Cal. App. 566, 575, 281 P. 1091 (1929).
 Handley v. Handley, 179 Cal. App. 2d 742, 746, 3 Cal. Rptr. 910 (1960).
 Bezaire v. Fidelity and Deposit Co., 12 Cal. App. 3d 888, 893, 91 Cal. Rptr. 142 (1970).
 Cal. Civ. Code §1710(1); In re Cheryl E., 161 Cal. App. 3d 587, 599, 207 Cal. Rptr. 728 (1984).
 Seeger v. Odell, 18 Cal. 2d 409, 414, 115 P.2d 977 (1941).
 Civille v. Bullis, 219 Cal. App. 2d 134, 32 Cal. Rptr. 607 (1962).
 Ashburn v. Miller, 161 Cal. App. 2d 71, 79, 326 P.2d 229 (1958).
 Continental Airlines, Inc. v. McDonnell Douglas Corp., 216 Cal. App. 3d 388, 402, 264 Cal. Rptr. 779 (1989).
 Conrad v. Bank of America, 45 Cal. App. 4th 133, 157, 53 Cal. Rptr. 2d 336 (1996).
 Byrum v. Brand, 219 Cal. 3d 926, 942-45, 268 Cal. Rptr. 609 (financial consultant did not intend to induce reliance although he did conceal, suppress and misrepresent a material fact to investor).
 Masters v. San Bernardino County Employees Retirement Ass’n, 32 Cal. App. 4th 30, 41, 37 Cal. Rptr. 2d 860 (1995).
 Engalla v. Permanente Medical Group, Inc., 15 Cal. 4th 951, 976-77, 64 Cal. Rptr. 2d 843 (1997).
 Anderson v. Thacher, 76 Cal. App. 2d 50, 65-71, 172 P.2d 533 (1946).
 Vasquez v. Superior Court of San Joaquin County, 4 Cal. 3d 800, 814, 94 Cal. Rptr. 796 (1971).
 Brownlee v. Vang, 235 Cal. App. 2d 465, 474, 45 Cal. Rptr. 458 (1965); Carroll v. Dungey, 223 Cal. App. 2d 247, 254, 35 Cal. Rptr. 681 (1963).
 Cal. Civ. Code §1709.
 O’Hara v. Western Seven Trees Corp., 75 Cal. App. 3d 798, 804-06, 142 Cal. Rptr. 487 (1977).
 (Cal. Civ. Code §§1709, 1333; Salahutdin v. Valley of California, Inc., 24 Cal. App. 4th 555, 567-68, 29 Cal. Rptr. 2d 463 (1994); see Alliance Mortgage Co. v. Rothwell, 10 Cal. 4th 1226, 1240-41, 44 Cal. Rptr. 2d 352 (1995) (quoting Kenly v. Ukegawa, 16 Cal. App. 4th 49, 53, 19 Cal. Rptr. 2d 771 (1993) (includes out of pocket and benefit of the bargain damages))).
 (Stout v. Turney, 22 Cal. 3d 718, 725, 150 Cal. Rptr. 637 (1978) (Civil Code §3343 does not require the plaintiff to show “out-of-pocket” loss to be entitled to consequential or additional damages of the type prescribed by the statute)).
 (O’Hara v. Western Seven Trees Corp., 75 Cal. App. 3d 798, 804-06, 142 Cal. Rptr. 487 (1977)).
 (Bank of America Nat’l Trust & Savings Assn. v. Greenbach, 98 Cal. App. 2d 220, 238, 219 P. 814 (1950) (upon discovery of fraud, the plaintiff may have the contract rescinded and recover damages incurred); see also Karoutas v. HomeFed Bank, 232 Cal. App. 3d 767, 773, 283 Cal. Rptr. 809 (1991); Earl v. Saks & Co., 36 Cal. 2d 602, 612, 226 P.2d 340 (1951) (in certain circumstances no economic injury at all is required).
 (McClure v. Cerati, 86 Cal. App. 2d 74, 83, 194 P.2d 46 (1948) (the party who enters a contract as a result of fraud may seek reformation of the contract so that it expresses the intention of the parties; reformation will only be granted where the prior contract was not void in the first instance)).
 (Seeger v. Odell, 18 Cal. 2d 409, 417-18, 115 P. 2d 977 (1941)).
 (Cal. Civ. Code §§1709, 1710 (injured plaintiff entitled to recover for any and all detriment proximately caused by the misrepresentation)).
 Cal. Civ. Code §3288; Alliance Mortgage Company v. Rothwell, 10 Cal. 4th 1226, 1241, 44 Cal. Rptr. 2d 352 (1995) (quoting Nordahl v. Department of Real Estate, 48 Cal. App. 3d 657, 665, 121 Cal. Rptr. 794 (1975) (jury has the discretion to award prejudgment interest on plaintiff’s loss from the time plaintiff parted with the money or property based on the defendant’s fraud)); see also Smith v. Rickards, 149 Cal. App. 2d 648, 654, 308 P.2d 758 (1957)).
 (Cal. Civ. Code §3294(a) (punitive damages may be recovered where fraud is proven by “clear and convincing” evidence)).
 Cal. Civ. Code §3294(b)(3).
 Cal. Civ. Code §338.
. Lee v. Escrow Consultants, Inc., 210 Cal. App. 3d 915, 921, 259 Cal. Rptr. 117 (1989); Tijsseling v. General Acc. ETC Assurance Corp., 55 Cal. App. 3d 623, 628, 127 Cal. Rptr. 681 (1976).
 (Schied v. Bodinson Mfr’g Co., 79 Cal. App. 2d 134, 142, 179 P.2d 380 (1947) (accepting substantial benefit constitutes a waiver of any right to tort damages); cf. Jue v. Smiser, 23 Cal. App. 4th 312, 315, 28 Cal. Rptr. 2d 242 (1994) (citing Bagdasarian v. Gragnon, 31 Cal. 2d 744, 192 P.2d 935 (1948))).