Fraud in the factum is a type of
fraud
In law, fraud is intentional deception to secure unfair or unlawful gain, or to deprive a victim of a legal right. Fraud can violate civil law (e.g., a fraud victim may sue the fraud perpetrator to avoid the fraud or recover monetary compens ...
where
misrepresentation
In common law jurisdictions, a misrepresentation is a false or misleading '' R v Kylsant'' 931/ref> statement of fact made during negotiations by one party to another, the statement then inducing that other party to enter into a contract. The m ...
causes one to enter a
transaction without accurately realizing the risks, duties, or obligations incurred.
Black's Law Dictionary
''Black's Law Dictionary'' is the most frequently used legal dictionary in the United States. Henry Campbell Black (1860–1927) was the author of the first two editions of the dictionary.
History
The first edition was published in 1891 by West P ...
(2nd Pocket ed. 2001 pg. 293). This can be when the maker or drawer of a
negotiable instrument
A negotiable instrument is a document guaranteeing the payment of a specific amount of money, either on demand, or at a set time, whose payer is usually named on the document. More specifically, it is a document contemplated by or consisting of a ...
, such as a
promissory note
A promissory note, sometimes referred to as a note payable, is a legal instrument (more particularly, a financing instrument and a debt instrument), in which one party (the ''maker'' or ''issuer'') promises in writing to pay a determinate sum of ...
or
check
Check or cheque, may refer to:
Places
* Check, Virginia
Arts, entertainment, and media
* ''Check'' (film), a 2021 Indian Telugu-language film
* ''The Checks'' (episode), a 1996 TV episode of ''Seinfeld''
Games and sports
* Check (chess), a thr ...
, is induced to sign the instrument without a reasonable opportunity to learn of its fraudulent character or essential terms. Determination of whether an act constitutes fraud in the factum depends upon consideration of "all relevant factors". Fraud in the factum usually voids the instrument under state law and is a
real defense
A real defense is a justification for a maker or drawer not to honor a negotiable instrument even if it has been transferred to a holder in due course (or "HDC") because it makes the instrument “void” according to Uniform Commercial Code §3-30 ...
against even a
holder in due course
In commercial law, a holder in due course (HDC) is someone who takes a negotiable instrument in a value-for-value exchange without reason to doubt that the instrument will be paid. If the instrument is later found not to be payable as written, a h ...
.
Contrast this with the situation where a trusted employee signs a check without permission. The employer must still honor the check despite the fact that the check was a fraudulent negotiable instrument. Here, the employer had a reasonable opportunity to avoid the obligation by restricting access to the checks.
Fraud in the factum is often contrasted with fraud in the inducement.
* ''Fraud in the factum'' is a
legal
Law is a set of rules that are created and are enforceable by social or governmental institutions to regulate behavior,Robertson, ''Crimes against humanity'', 90. with its precise definition a matter of longstanding debate. It has been vario ...
defense, and occurs where A makes/signs an agreement, but either does not realize that it is supposed to be a contract, or does not understand the nature/content of the agreement, because of some false information that B gave to A. ''For example,'' suppose John tells his mother that he is taking a college course on
Handwriting Analysis
Graphology is the analysis of handwriting with attempt to determine someone's personality traits. No scientific evidence exists to support graphology, and it is generally considered a pseudoscience or scientifically questionable practice. Howe ...
, and for his homework he needs her to read and sign a pretend deed. If Mom signs the deed believing what he told her, and John tries to enforce the deed, Mom can plead "fraud in the factum".
* ''Fraud in the inducement'' is an
equitable defense, and occurs when A enters into an agreement, knowing that it is supposed to be a contract and (at least having a rough idea) what the agreement is about, but the reason A signed/made the agreement was because of some false information that B gave to A. ''For example,'' suppose John tells his mother to sign a deed giving him her property, Mom refuses at first, but then John falsely tells her that the bank will foreclose on the property unless she signs it over to him. If Mom signs the deed because of this statement from John, and John tries to enforce the deed, Mom can plead "fraud in the inducement".
See also
*
As is
As is, when employed as a term with legal effect, is used to disclaim some implied warranties for an item being sold. Certain types of implied warranties must be specifically disclaimed, such as the implied warranty of title. "As is" denotes tha ...
*
Extrinsic fraud
Extrinsic fraud is fraud that induces one not to present a case in court or deprives one of the opportunity to be heard or is not involved in the actual issues. More broadly, it is defined as:
Extrinsic fraud often involves fraud on the court, ...
*
Fraud
In law, fraud is intentional deception to secure unfair or unlawful gain, or to deprive a victim of a legal right. Fraud can violate civil law (e.g., a fraud victim may sue the fraud perpetrator to avoid the fraud or recover monetary compens ...
*
Intrinsic fraud
Intrinsic fraud is an intentionally false representation that goes to the heart of what a given lawsuit is about, in other words, whether fraud was used to procure the transaction. (If the transaction was fraudulent, it probably does not have the l ...
* ''
Per minas
''Per minas'', in English Common Law, is to engage in behaviour "by means of menaces or threats".
The term comes from Latin.
''Per minas'' has been used as a defence of duress to certain crimes, as affecting the element of ''mens rea''. Will ...
''
References
{{reflist
Negotiable instrument law
Fraud