Fraud and Misrepresentation

Black's Law Dictionary (8th ed. 2004) defines fraud as "a knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his or her detriment." By definition this tort is clearly an intentional act by the torfeasor. To prove fraud, there are five factors which must exist.

1. The defrauder intended to deceive by falsely representing facts.

2. The defrauder has to know that the statements made were false.

3. The purpose of such statements must persuade the victim into giving the defrauder something of value.

4. The victim must have reasonably relied on the misrepresentation.

5. The defendant must be injured.

Misrepresentation follows a very close parallel to fraud and, although a separate tort, is commonly considered the same tort by many courts. The key difference between the two is the goal of economic gain found in fraud. Misrepresentation is broken down into three categories.

1. Innocent misrepresentation which is a false statement not known to be false.

2. Negligent misrepresentation is a statement made when the party making the statement should have taken pause as to the accuracy of the statement.

3. Fraudulent misrepresentation is just as its named, a false statement that the party knows to be false and the purpose is to deceive.

In the following cases I will discuss the facts of each case and how they relate to the elements of fraud and misrepresentation.

The first case I will discuss is SPOLJARIC v. PERCIVAL TOURS, INC., 708 S.W.2d 432; 1986 Tex. LEXIS 949; 29 Tex. Sup. J. 280. In this case the ruling of the lower court which found in favor of the former employer, Percival Tours, Inc., was challenged in the Texas Supreme Court by the petitioner, Ralph Spoljaric. The lower court had ruled that there was insufficient evident to prove fraud and misrepresentation as well as breach of contract. The Texas Supreme Court overruled that decision and determined that the petitioner was due an award of punitive damages. The basis of the case is centered on the perceived misrepresentation of the employer to the employee, to implement a bonus plan, which was never realized. Mr. Spoljaric had desired to leave his position with Percival Travel Inc., after his existing employment contract expired, to pursue a higher paying career. After several meetings he accepted a verbal offer made by Jessie Upchurch, president of Percival Tours, for an increased salary and a proposed bonus plan. After receiving the petitioner's draft of the bonus plan which had been written upon the employer's request, the employer stalled on signing the plan. He claimed that it was in legal review. The defendant then acquired another company; Jackson Travel Agency. Robert Jackson was named President and COO of the newly formed joint company. When Mr. Spoljaric approached Mr. Jackson with the promised bonus plan he stated he had no knowledge of such plan. Upon Mr. Spoljaric's request, Mr. Jackson then presented Mr. Upchurch