Fraud Is an Important Consideration in the Essay

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Fraud is an important consideration in the area of legal contracts because of the fact that if fraud is present in the formation of a contract, the contract can, and mostly will, be invalidated. To establish contract fraud, it must be established that the party committing the fraud knowingly misrepresented a material fact with the intent to defraud and that the opposing party justifiably relied upon such misrepresentation (Blair, 2009). In order for the fraud to affect the contract the effected party must have suffered injury. Without injury the contract will not be affected.

In the legal sense, a misrepresentation of a material fact usually means that a party lied about a term of the contract that was essential in the decision making process that resulted in the contract being formed. It is important to distinguish between what constitutes a lie in the formation of a contract and what constitutes what is ordinarily considered mere "puffing." In the negotiation of nearly every contract there are statements made that are opinions and not facts that are used to induce the contract (Shell, 1991).

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Such statements do not constitute fraud. In order to constitute fraud the statement must be clearly factual and rise to the level of being a discernible lie, however, silence can constitute a fraudulent act when a party fails to disclose a hidden defect of which he is aware. To be considered material a fact must be likely to play a significant role in inducing a reasonable person to enter a contract or if the person asserting the fact knows that the other person is likely to rely on the fact.

Any misrepresentation that is made must be done knowingly. Knowingly in the legal sense requires that the fraudulent party knew that the misrepresentation was false and that he or she had no basis for making the statement or made the statement without being confident that it was true.

The fact that a material representation exists and has been knowingly made is not sufficient to establish fraud, it must also be shown that such misrepresentation was justifiably relied upon. This means that the….....

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