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What Does California Law Consider Fraud?

Fraud — in a legal context — is put within a narrowly defined category. In regular parlance, the nature of fraud is generally considered to mean that an individual has been deceived by someone who they rightfully trusted. The special nature of fraud, in many legal cases, is considered both a crime and a civil matter.

In California, a case of fraud must prove the following (1) an intentional misrepresentation of facts, (2) a misleading false statement or negligent misrepresentation, (3) false promises, and (4) an opinion expressed as fact or intentional concealment.

Although fraud can be proven in various ways, generally any claim of fraud must prove there was substantial and significant harm done because of fraud. Fraud becomes a crime and civil matter because it essentially claims that there was a deception made with intentions of depriving the plaintiff of their money, property, and/or rights. Legal definitions of fraud and deceit can be found in the California Civil Code Sections 1572, 1709, and 1710.

Forms of Fraud Permitted Under California Law

Intentional misrepresentation claims that the defendant, or wrongdoer, made a false representation that harmed the plaintiff. To establish this claim, the plaintiff must prove the following:

  • The defendant made a false statement of fact — knowing the statement is not true. In other words, the wrongdoer's representation was false. General embellishment or statements of opinion can be considered intentional misrepresentation. For example, a salesperson boasting about an exaggerated opinion about a product’s benefits or performance.
  • There was intent by the defendant to defraud another party with the false statement. The defendant knew the representation was false, or they made the statement as mentioned above of truth recklessly without regard for the facts.
  • The defendant purposefully intended for the plaintiff to rely on the misrepresentation of fact. This, in turn, caused substantial harm to the plaintiff.
  • The plaintiff suffered damages as an actual and proximate result of the intentional misrepresentation.

Negligent misrepresentation claims the defendant makes a false statement to the plaintiff, without a reasonable basis of belief, as determined by a jury or judge, that the statement is true. Even if the defendant believes the false statement is true. This means the defendant was intentional in their misleading and meant for the plaintiff to rely on a misrepresentation of fact. Moreover, the plaintiff did reasonably rely on the false statement, which caused them substantial harm.

Intentional concealment claims the plaintiff experienced substantial harm because the defendant concealed certain information. To establish the claim of concealment, the following must be proved:

  • That the defendant and plaintiff were in a fiduciary relationship (imposing a responsibility to disclose facts), e.g. business partners, and
  • Furthermore, the wrongdoer prevented the plaintiff from discovering the facts due to (1) concealed the facts or (2) omitted information, and had the plaintiff been aware would have reasonably behaved differently.

A false promise claim of fraud proves that the defendant made a promise they did not intend to perform at the time the promise was made. Moreover, the defendant made a promise intending the plaintiff to rely on it, and the plaintiff did reasonably rely on the promise.

Pleading Fraud in California

If you have a viable claim of fraud, a substantial larger damage award can be won. In comparison to a breach of contract claim, a fraud claim is much more significant. Or a proven fraud claim can provide additional leverage for a settlement on the plaintiff's behalf. This damage award is due to punitive damage. Punitive damages are often based on a percentage of the wrongdoer's revenue, which without proof of fraud, would not be considered in awarding damages.

If you happen to be involved in a dispute involving fraud, the proven experience of Nick Heimlich Law business litigation attorneys can help. We can help you identify fraud, understand your options, and work to lead you toward smooth recovery. Contact Nick Heimlich Law for a consultation.