Contracts and Fraud
Contracts are one of the cornerstones of our modern legal system. They are necessary to conduct reliable economic transactions between individuals. When people make a formal agreement such as buying a car they must be assured that the requirements of both parties will be fulfilled: the seller will receive his or her money and the buyer will receive a vehicle. A critical component of contract law is the need for a contract that is not fraudulent in nature, since contracts depend upon a system of trust between both parties. "If fraud or misrepresentation occurred during the negotiation process, any resulting contract will probably be held unenforceable. The idea here is to encourage honest, good faith bargaining and transactions. Misrepresentations commonly occur when a party says something false (telling a potential buyer that a house is termite-free when it is not) or, in some other way, conceals or misrepresents a state of affairs (concealing evidence of structural damage in a house's foundation with paint or a particular placement of furniture)" (Fitzpatrick 2013).
Without fraud invalidating a contract, there would be a great incentive for people to conceal the truth about the full terms of a contract, to construct an agreement give them an unfair advantage. Contracts are based upon an offer and acceptance of that offer, but when there is fraud there is no true 'acceptance' of the extended offer. To prove fraud in a court of law, however, requires the offended party to establish that very specific conditions were met which invalidate the contract. For fraud to exit, there must be "an untrue representation of fact knowingly by a party; making such representation recklessly; [and] making untrue representation...
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