Business (or corporate) fraud has been defined generally as anything intended to deceive, including all acts, omissions, and concealments involving one’s breach of a legal duty, trust or confidence resulting in damage or injury to another or a business. Whether business fraud has occurred is generally a question of fact dependent on the circumstances of each particular business situation or business transaction. In other words, it will be determined on a case-by-case basis. However, it should be noted that most often erroneous statements of matters of opinion do not amount to fraud, nor do instances of exaggerated or unwarranted “puffing.”
At the heart of the business tort of misrepresentation is the fiduciary duty to refrain from making intentional false assertions that mislead others to rely on such false representation. Thus, generally speaking, the fundamental requirement of this type of business fraud is that the person in a fiduciary relationship with another make a knowing false representation. This misrepresentation may be a verbal statement, an active gesture, or a knowing concealment of materially true and significant facts. Further, ambiguous and incomplete representations that are false and misleading qualify as misrepresentations, even if the misrepresentation was made negligently or with the knowledge that the recipient might be misled by the false statement.
For example, a prospective seller of a business may be liable for business fraud, possibly through a breach of contract issue, if he or she discloses financial records of the business that place the profitability of the business in a positive light, but fails to provide other records that are capable of a different interpretation. However, failure to disclose important facts, such as the seller’s financial records, which are subject to ordinary inspection and inquiry, or about which there is not expectation of disclosure, either because of the arm’s length business transaction or the absence of any communications between the parties, may not support an action for business fraud or misrepresentation. The intention of inducing reliance on the business fraud or misrepresentation is the key to the scope of the misrepresenter’s liability.
If you think you or your business needs assistance with business fraud lawsuit, contact our Chicago litigation attorneys. Please feel free to email or call our Chicago law office to inquire about your business fraud case.