Human interaction naturally leads to misunderstandings. Some misunderstandings are unintentional. Other times, people intend to mislead us. The natural reaction to being misled is at least embarrassment or resentment and occasionally anger.
Although people can make bad decisions, people should not be defrauded. Therefore, certain misunderstandings can be fraud under the law. Ohio law draws a line between simply “a bad deal” and “fraud.”
The emotional responses to being misled (embarrassment or resentment) often lead people who are misled in any way to think that they were defrauded. Generally, if a transaction is fraudulent, six circumstances must be present. Those circumstances (or “requirements”) are intricate and very detailed so that situations are only corrected when fraud is truly present.
First, there must be some representation or statement. Ironically, not disclosing a fact that legally must be disclosed is also considered a representation.
Second, the representation must be “material.” In other words, the representation must relate to something that really matters to the transaction. For example, whether a consumer good was made in China or Taiwan is not usually material because that fact alone is not usually a “deal-breaker” as to whether that item is purchased.
Third, the representation must be false and known to be false by the person making the representation. In other words, an honest mistake should not be considered fraud.
However, a person making a representation cannot bury his or her head in the sand, either. For example, the seller of a tool is considered to know whether that tool literally does or does not work. A person making a false representation is considered to know that the statement is false, if any reasonable person making the representation would know if it was true or false.
Fourth, the representation has to be made by someone who literally intends to mislead someone else. Television infomercials may misstate or overgeneralize some details of a product being sold. Those misstatements may have been made to allow the presentation to fit within an allotted time or space. If a representation was not made with an intention to mislead, this requirement is not satisfied.
Fifth, the person who was misled must have been reasonable in believing the representation. If my car salesman guarantees the re-growth of my hair if I buy a new car, I would be an idiot to believe him. If a person should know better, the person is not defrauded. Simply put, if something is literally too good to be true, it may not be fraud for that reason alone.
Sixth, the misrepresentation must cause some financial or physical damage. Notably, embarrassment or even humiliation is usually not considered “damage” under this requirement.
Obviously, it is not easy to prove fraud. Evaluating the six requirements is a sometimes very tiring analysis for which jurors are to be commended for enduring. However, when a jury decides that all six requirements are satisfied, the system may give the defrauded person some opportunity to recover money or potentially undo the unfair deal.