Fraud, in law, a general term for any scheme or method used by one person to gain an unfair advantage over another. Fraud is a tort (civil wrong) for which the injured party may bring suit to collect damages. It most commonly involves a transaction in which one person is selling something to another.

The courts have been wary of giving fraud a precise definition, since to do so would be to set limits outside of which unscrupulous persons would be free to commit deceptions with comparative safety. It is generally agreed, however, that three elements must be present for fraud to be committed:

  • A statement or other representation must be made that is false and has a direct bearing on the transaction; or a fact must be concealed that has bearing.
  • The person committing the fraud must know the representation is false and must make it with the intent of deceiving. If the incorrect statement is his honest opinion, fraud is not present.
  • The person deceived must believe the statement made and as a result suffer damage to the extent that he gives up property (such as money) or surrenders some legal right.