Fraud: Remedies available to defrauded parties

Fraud can be defined as the unlawful and intentional making of a representation that causes actual or potential prejudice to another. Parties often act on the strength of another’s representation in order to commit some or other act. Such an innocent party may have acted to their detriment if the representation was fraudulent. The innocent party has, broadly speaking, two remedies available to them. The innocent party could cancel an agreement if the representation led to them entering into a contract. The innocent party will then have to tender restitution. The innocent party can also claim damages from the fraudulent party. This article will briefly discuss the essential elements which must be proven to succeed with one of the remedies.

It is a general requirement that a party who intends to rely on fraud in order to obtain some or other relief must not only plead it but must prove it “clearly and distinctly”. The plaintiff must accordingly prove fraud in terms of the ordinary civil onus, being above a balance of probabilities.

A plaintiff wishing to rely on fraud must plead and prove the following essential elements:

1. There must first be a representation by the other party. This representation does not necessarily have to have been personally made but could also have been made by a party’s agent or representative.
2. The plaintiff must secondly allege and prove that the representation was fraudulent. The person making the representation, or their principal must have had knowledge that the representation was false. It is important to note that the plaintiff cannot merely allege that the representation was false as a mere false representation does not constitute fraud. The “mental element” must be alleged, which includes that the person making the representation or their principal’s intention led the innocent party to act on the strength of the representation.
3. The plaintiff must thirdly allege and prove a causal link (causation) between the representation and their action. In other words, the representation must have induced the innocent party to act.
4. Should the innocent party want to claim damages, they must allege that they have suffered damages.
5. Fraud is not necessarily committed by way of an express representation but can also be the result of a fraudulent non-disclosure. Should the innocent party wish to rely on such a non-disclosure, then they must set out the facts giving rise to the duty to disclose. The party must allege and prove that the duty to disclose was deliberately breached in order to deceive the innocent party.

It is best to arrange a consultation with a dispute resolution attorney if you believe that you have suffered damages in any way due to another party’s false representation.

Reference List:
Amler’s Precedents of Pleadings 8th edition.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)