Statutory Fraud in Texas

Texas Statutory Fraud

An act of fraud involves misrepresenting or deceiving someone, causing harm to that person in the process. Statutory fraud is a particular kind of fraud which involves real estate or a stock transaction. Texas law prohibits a person from using false or incomplete information when inducing another person to sign a contract. If the misrepresentation leads the person to sign a real estate contract or complete a stock transaction, that is statutory fraud.

The Elements of Statutory Fraud

There are two forms of misrepresentation that are accepted as statutory fraud in Texas. The first occurs when a person makes false claims to induce the plaintiff to enter a contract. The second form occurs when a promise is material, and a person does not intend to fulfill that promise, and because of the material promise, the plaintiff agrees to the contract. Tex. Bus. & Com. Code Ann.§27.01 (a).
The four elements which make up statutory fraud are that the defendant falsely promises some material action; the defendant does not intend to keep that promise; the defendant misrepresents information specifically to induce the plaintiff to enter into the contract; and the plaintiff enters into a contract because of the false claim. It is not necessary to prove that the speaker was knowledgeable or reckless in making the claims. Also, the property does not have to be transferred for the plaintiff to have a valid fraud case, as long as there was a contract to convey the property.

The Remedies for Statutory Fraud

If the plaintiff successfully proves that statutory fraud has occurred, he or she may receive compensation for actual losses, such as out-of-pocket and personal property damages. As punishment and a deterrent, the defendant may also be required to pay exemplary damages, compensation that is more than the actual loss sustained. Tex. Bus. & Com. Code Ann.§27.01 (b-d).According to Texas Business and Commerce Code § 27.01 (e), defendants may also be required to pay attorney’s fees and additional court costs and fees, including expert witness fees.

Given the complexities, penalties, and legal implications of statutory fraud, hiring a qualified lawyer is crucial to successfully navigating a claim of statutory fraud.

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