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What is Fraud?

What is Fraud?

Most everyone is familiar with the word fraud. They’ve heard it used to describe a person that is not what they appear to be, or they have heard it used to describe an act of deceit. However, this common and acceptable use of the word fraud, in every-day conversation, can lead to misunderstandings as to what amounts to fraud under the law when an interaction with another person or business does not end in a desirable manner.

For example, most people have bought an item only to have it not work the way they expected, or they have hired someone to do a job and have been unhappy with the result. Unsatisfying as these types of experiences might be, it does not always mean a fraud has occurred within the meaning of Indiana law.

To prove actual fraud, within an Indiana legal context, there must be a:

  • (i) material misrepresentation of past or existing facts by the party to be charged
  • (ii) which was false
  • (iii) which was made with knowledge or reckless ignorance of the falseness
  • (iv) was relied upon by the complaining party and
  • (v) proximately caused the complaining party injury.

It is this first portion (i) that can sometimes be confusing because fraud cannot be based on unfulfilled promises or on statements concerning future events.

For example, if a person is given $20 in exchange for a promise to mow the lawn, and then fails to mow the lawn, the person has breached an oral contract to mow the lawn, but has not committed fraud because they only failed to fulfill a promise. On the other hand, if that same person said they had been hired by ten of the neighbors, they were incorporated and insured, and possessed industrial lawn mower equipment, a different result is likely if none of the statements were true. Indeed, if none of the neighbors had ever hired this person, there was no insurance or corporation, and there was no industrial equipment, the person likely made the material misrepresentations of past or existing facts that are needed to prove fraud.

From the above example, it can be seen that cases involving allegations of fraud are almost always unique to the specific facts and circumstances of the individual matter, and sometimes it can be challenging to know if you have been a victim of fraud or if you have been falsely accused of committing fraud.

The attorneys at Goodin Abernathy can help sort through these types of issues and are available for a free consultation if you have questions about fraud.