Fraud in the execution is an illegal act that can lead to serious consequences. Fraud is considered any action that is deliberately planned to deceive another person with a negative effect towards that person. Fraud can include misrepresenting an aspect of a transaction or leaving something out of a contract that could lead another party astray. Committing fraud can be a serious criminal act.

Understanding Types of Fraud

Actual fraud is committed when there is an intent to hurt someone else. Constructive fraud doesn't always involve an intent to deceive, but it is still considered fraud by law. Because it leads to the same result, constructive fraud is usually treated the same as actual fraud.

Extrinsic fraud occurs when someone is swindled or receives a false offer to not present a case in court. Also called collateral fraud, this action usually stops a full and fair hearing from taking place.

Fraud is considered fraud in law when it happens in light of the circumstances, regardless of an intent to deceive.

Fraud in the factum occurs when one party deceives another party so that they misunderstand the nature of the transaction they are entering into. This most commonly occurs with parties entering into a contract together and is also known as fraud in the execution. Fraud in the factum happens when a contract that is actually created is different from what was intended to be created, especially when the person being deceived into signing the fraudulent document doesn't have time to review what they are signing. 

This could happen if a blind person is told they are signing a letter when they are really signing a lease, or if an elderly person is told they are signing a permission slip when they are really signing a form to change their will and who receives their fortune. This can also happen if two people agree on a contract, but at the last minute one of the people makes changes to the contract and doesn't allow the other party to review the deceptive changes. In most cases, fraud in the factum voids a contract.

Fraud in the Inducement

One the other hand is fraud in the inducement, which happens when one party encourages the other party to sign a contract that they don't understand. This occurs when one person scams or uses deceptive tactics to get the other person to do what they want them to. According to law, for fraud in the inducement to have happened, two things need to occur:

  • One party has misled the other about the facts and
  • The other party used those facts to make a choice

An example of this would be if Joe told Susan that a bank was coming to foreclose her house unless she signs the house over to Joe. While the facts may be true, Joe is misleading Susan as to what will really happen if she signs over her house. It can also happen if someone knowingly finalizes a will but includes clauses that came about deceptively. 

Another example is if Sally tells Bob that she is a licensed real estate agent and can help him purchase property if he signs a contract. Sally is not actually a real estate agent but Bob signs the contract because he has been deceived. Fraud in the inducement happens because Bob signed the contract believing he was actually going to work with a real estate agent. Fraud in the inducement involves the circumstances that led a person to act.

Fraud in the inducement is always illegal. The contract can be voided if the court finds that it was entered using fraud. If this happens, any duties in the contract are considered fraudulent and don't have to be followed.

Additional Forms of Fraud

There are other types of fraud, including:

  • Fraud on the court, where the integrity of the judicial process is undermined, such as if a judge or jury is improperly influenced
  • Intrinsic fraud, when someone tries to convince a person of something that isn't true by using forged documents or false claims
  • Mail fraud, which involves fraud committed using the postal service and mail
  • Wire fraud, which is committed by using electronic communication like a telephone

If you need help with fraud in the execution, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.