In Georgia, a claim of fraud may exist when a business is involved in misrepresenting or concealing the quality of its products, services, or practices.

Fraud is not always committed through an explicit misrepresentation. Georgia law recognizes that fraud can be subtle and committed in many different ways. Tricks, signs, and even silence can often be enough to constitute fraud in Georgia. It is also important to note that monetary damages are not required to succeed in an action for fraud. Embarrassment or ridicule suffered by the injured party can be enough to sustain an action.

There are also times when a business or employee is obligated to disclose facts to another party due to a confidential relationship. A confidential relationship generally exists when one party exercises influence over the will or judgment of the other party, and in such cases, Georgia law requires good faith to be exercised at all times. In these protected relationships, there is a greater duty to reveal information, and a possible claim of fraud should be explored when information is concealed or misrepresented.

The injured party in fraud cases is normally compensated by finding the difference in value between what is conveyed and its value had the representation been true. However, due to the serious threat fraud poses to our economy and the welfare of the individual, a plaintiff may also seek punitive damages when malice or willful misconduct can be shown. The purpose of punitive damages is to punish the party for committing fraud and deterring others from doing the same.

Georgia law requires the injured party to prove five elements to succeed in an action for fraud. First, there must be a false misrepresentation of a material fact. A material fact is simply information which persuades a party to enter into an agreement. It can also be viewed as a piece of information of such importance that the agreement would not have been made without the misrepresentation. Second, the defendant must have known the statements were false. In the alternative, it can be shown that the party committing the fraud acted with reckless disregard if actual knowledge cannot be proven. Third, the plaintiff must show that the defendant made the statement to induce the plaintiff to act. Fourth, reliance must be proven. Reliance simply means the plaintiff acted upon the misrepresentations. Finally, the plaintiff must show that he suffered a loss due to the misrepresentations.

A defendant has an array of potential defenses to a claim of fraud. A defendant may attack the agreement or contract itself. For example, some contracts contain merger clauses. Merger clauses in a contract state that the defendant is only bound to the terms in the written contract. In some cases, this means that any statement not explicitly spelled out in the written contract cannot qualify as fraud. Thus, statements made prior to the signing of the contract would not be considered by the court.

In addition, an action of fraud may fail if a diligent inspection would have discovered the misrepresentation. It is usually not enough for a plaintiff to assume that what he or she is being told is true. Instead, the court will often look to see if the plaintiff could have reasonably made an independent inquiry into the truth of the representations.

Another defense is to argue the misrepresentation was merely an opinion. Under Georgia law, an injured party is not justified in relying upon opinions. Thus, a defendant is allowed to use puffery or state hopes and expectations about a product or service. Georgia believes it is the duty of the plaintiff to inquire into whether the opinions are true or false. For instance, stating that a company has a bright future would probably not constitute fraud since it is merely an opinion.

The information provided above is a very general summary of the law regarding this particular legal issue at the time this text was prepared. Because this analysis is subject to change depending upon recent cases and developments, you should not rely on this summary as legal advice. As with any important legal question, you should always consult with a lawyer licensed to practice in your jurisdiction. Our lawyers are licensed to practice in all Georgia state and federal courts.