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What is Fraud?

Updated on January 16, 2010

Fraud, in law, is an intentional misrepresentation or omission of fact for the purpose of depriving some­one else of money or property.  Fraud itself is not a crime, but some crimes, such as obtaining money under false pretenses, cannot exist without involving fraud. Actual fraud is the deliberate misrepresentation that results in depriving another of his rights or goods. Constructive fraud usually occurs when a per­son in a position of confidence or trust unintentionally gains an advantage.

Since the law considers that a buyer should be wary in order to protect his own interests, a salesman who gives a highly overstated opinion about the quality of his wares is not guilty of fraud. However, if he mis­represents a fact about those goods, he may be guilty of fraud. The case is studied especially closely if the presumed victim is under age or mentally incompetent.

The first legislative attempts to protect individuals from fraud were passed in 16th-century England, and since that time the number of laws protecting both individuals and the general public has grown enormously in England and the United States. In the United States the Securities and Exchange Commission regulates stocks and bonds to prevent swindling, and the Pure Food and Drug Administration tests and approves medicines and foods.

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