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What is the tort of fraud in Maryland?

By August 29, 2014 November 19th, 2019 Construction Law

I frequently hear people misuse the term “fraud” in conversation. It is easy for many people to assume that a fraud is being committed when they feel lied to, cheated or betrayed. When does a lie turn into fraud and how can you tell the difference between the two? The purpose of this article is to explain the tort of fraud in layman’s terms in hopes of providing a better understanding to this complicated cause of action in Maryland.  

What is the tort of fraud in Maryland? Maryland law recognizes fraud as "a promise made with [the] present intention not to perform it.” See Sass v. Andrew, 152 Md. App. 406, 436 (Md. Spec. App. 2003). In order for a plaintiff to prevail in a civil action for fraud, a plaintiff must prove the following five elements:

  1. 1.   The defendant asserted a false representation of a material fact to the plaintiff;

A “false representation is a statement, conduct, or action that intentionally misrepresents a material fact.” See Id. at 429. In other words, a false representation is an intentional untrue statement meant to mislead another. Also, the false representation must be about a “material fact” which is something of significance or importance to the other person or the transaction. In other words, the plaintiff might not have agreed or entered into an agreement if the truth was known about that “material fact.”

  1. 2.   The defendant knew that the representation was false, or the representation was made with such reckless disregard for the truth that knowledge of the falsity of the statement can be imputed to the defendant;

For the second element of fraud, a plaintiff must show that at the time the untrue statement was made by the defendant that the defendant knew the statement was false or that the defendant should have known that the statement was false. Here, it is important to show that what the defendant was saying was not what the defendant intended to do. The best proof for this element is through building a paper trail. You can build a paper trail through letters, e-mails or other documents that demonstrate that the defendant was untruthful and knew or should have known he was untruthful.

  1. 3.   The defendant made the false representation for the purpose of defrauding the plaintiff;

For the third element, a plaintiff must show that the purpose of the defendant making the untrue statement was meant to deceive the plaintiff and the plaintiff was in fact deceived. See Ellerin v. Fairfax Sav., F.S.B., 337 Md. 216, 232 (1995). Basically, this is where the plaintiff must show that the defendant was lying intentionally in order to induce the plaintiff to do what the defendant wanted. This element of fraud is one of the hardest elements to prove because most defendants will never admit that they were intentionally deceiving you.

  1. 4.   The plaintiff relied with justification upon the misrepresentation; and

In order to successfully prove this element of fraud, the plaintiff must show that the plaintiff justifiably relied on the defendant’s untrue statement. In other words, if the plaintiff should have known that the defendant’s statement was a lie, then the defendant will not be held accountable for his actions. A plaintiff cannot just enter into an obvious bad deal and then turn around and sue the defendant for fraud. This is a very similar concept to “Buyer Beware.” Also, a plaintiff’s education, experience, and credentials will be taken into consideration when a court evaluates whether the plaintiff’s reliance on the defendant’s untrue statement was justified.

  1. 5.   The plaintiff suffered damages as a direct result of the reliance upon the misrepresentation.

If a plaintiff has been able to prove all the above listed elements for fraud, the last thing a plaintiff has to prove is actual damages (money). This is where a plaintiff must show the amount of money that the plaintiff lost as a result of the defendant’s fraud. Maryland applies a flexibility theory to determine damages in fraud cases. See Goldstein v. Miles, 159 Md. App. 403, 422 (Md. Spec. App. 2004).  “A victim of fraudulent… misrepresentation may elect to recover either ‘out-of-pocket’ expenses or benefit-of-the-bargain damages.” Id. Out-of-pocket expenses “will permit the plaintiff to recover his or her actual losses.” See Id.  The benefit-of-the-bargain damages “put[s] the defrauded party in the same financial position as if the fraudulent representations had in fact been true.” See Id. Obviously, damages will vary depending on the facts of each case.

Maryland courts take any accusation of fraud very seriously, so they have made civil suit that contain an allegation of fraud extremely hard to prove in order help assure that fraud was actually committed. Therefore, the plaintiff must be able to prove all five of the above-listed elements with specificity and by clear and convincing evidence. See VF Corp. v. Wrexham Aviation Corp., 350 Md. 693. The clear and convincing evidence standard is the highest standard of proof in a civil case, i.e., more probable than not. See id.  In order to meet Maryland’s fraud specificity requirement, a Plaintiff must show specific dates, times, places, intent and specific statements or actions taken by a defendant to show fraud. Courts are essentially looking for plaintiffs to plead in their cause of action the “who”, “what”, “when”, “where”, and “how.” The more information, documentation and details a plaintiff can provide, the stronger the plaintiff’s case will be.  

If a plaintiff can prove all five elements of fraud by clear and convincing evidence, then the plaintiff will be successful on a fraud claim. Keep in mind that before a plaintiff endeavors in a lawsuit for fraud, the plaintiff should understand that fraud is one of the most difficult civil causes of action to prove in Maryland.   

(Note: Elements of Fraud provided from Sass v. Andrew, 152 Md. App. 406.)

Author Harrison Law Group

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