Fraud

Fraud. The term "fraud" is used in very many senses, but one incident common to all of them is the obtaining, or attempting to obtain, pecuniary or other advantage by unfair means.

1. Actual fraud is where one person causes injury to another by suppressing or misrepresenting a material fact which, from the circumstances of their relative position, he was bound to explain or disclose. This kind of fraud is sometimes designated "moral," as distinguished from legal or constructive fraud. The effect of this description of fraud is often countervailed by the conduct of the defrauded person, as, for instance, where he has not relied on the representation or misrepresentation, or where he has shown gross negligence.

2. Constructive or legal fraud applies to cases in which a court will enforce or set aside a transaction in which it is of opinion that it is wrong for a person to avail himself of the advantage he has obtained. This class of fraud sometimes exists where no wrongful intention is proved.

3. Fraud on third persons exists where one enters into agreement or obligation with another, and simultaneously or afterwards acts without his knowledge in such a way that the benefit of the agreement is partially or wholly lost to him.

4. Fraud by statute. Certain acts are made frauds by Act of Parliament. Thus, by the "Companies Act, 1867," a prospectus which does not comply with the requirements of the Act in specifying all contracts entered into by the company, or promoters, trustees, or directors thereof, before the issue of the prospectus, is to be deemed fraudulent. This is a case of legal fraud in which proof of fraudulent intention is not required.

The effect of fraud generally entitles the injured person to avoid the particular transaction in which it occurs.

5. Criminal fraud. There are also certain frauds dealt with by the criminal law, under which they are constituted misdemeanors; such are frauds committed by public officers in discharge of their duties and affecting the public, frauds committed by trustees, directors, and other officials.