Fraud

What is Fraud in Tort Law?

Quick Definition

Fraud in tort law (also called the tort of deceit) occurs where one party makes a false representation knowing it is untrue, or being reckless as to its truth, with the intention that another party relies on it. The claimant must show they relied on the statement and suffered loss as a result. It is one of the more serious civil wrongs because it involves dishonesty rather than mere carelessness.

In Context

Fraud typically arises in commercial dealings where one party is induced into a contract or financial decision based on lies. The leading authority is Derry v Peek (1889), which established the core requirement of dishonesty: there must be actual knowledge of falsity, absence of belief in truth, or recklessness. For example, if a company director knowingly exaggerates financial performance to attract investors, this may amount to fraud if investors rely on those statements and suffer losses. Courts treat such claims seriously, often awarding damages that aim to put the claimant in the position they would have been in had the representation never been made. In Doyle v Olby (Ironmongers) Ltd (1969), the court confirmed that damages for deceit can be more generous than in negligence, reflecting the defendant’s dishonest conduct. Unlike negligent misstatement, fraud does not require a duty of care—what matters is intention and reliance.

See Also

• Misrepresentation

• Negligence

• Vicarious Liability

Learn More

Explore our Tort Law Notes for deeper case law, examples, and revision tips.