How Fraud Statutes Work
It is not uncommon for a business owner to be the target of a fraudulent scheme, or to be accused of committing fraud. Manifesting in several contexts, all fraud is identical at its core. Fraud is generally defined as an intentional misrepresentation of a material existing fact made by one person to another with knowledge of its falsity and for the purpose of inducing the other person to act, and upon which the other person relies with resulting injury or damage.
Consequently, any fraud case involves three basic issues: 1) When the fraud was discovered; 2) The context of the alleged fraud; and 3) Whether there is fraud.
When the fraud was discovered
When the fraud was discovered is important because of the “ discovery rule” for fraud, stating generally, the statute of limitations on a claim involving fraud does not begin running until the fraud is, or should have been discovered, which may be well after the damage occurs.
The context of the alleged fraud
While the discovery rule tolls the statute of limitations (that is, keeps the statute of limitations from running on the clam until it is discovered), the rule does not enlarge the statute of limitations. Once the fraud is, or should have been discovered, the statute of limitations on the underlying claim (contract, tort, wrongful death, etc…) begins running.
For example, Nebraska generally has a five year statute of limitations for civil actions (law suits) on a written contract. This means a person has up to five years from the date she enters into a contractual agreement to file a claim for breach of contract. However, if the fraud was formed as part of a fraudulent scheme did not discover the fraud until a year after damages accrued, the statute of limitations would not start running until that the bracelet hit you in the head.
Whether there is fraud
Finally, it is important to note the discovery rule does not apply unless the transaction in question is deemed fraudulent. In the bracelet example, if you purchased the bracelet from a seller who thought he was selling you a genuine silver Tiffany bracelet, it would likely not be considered a fraud claim because the seller did not intentionally perverse the truth. In such event, the statute of limitations began running on the date the bracelet was purchased.
The laws concerning fraud are a valuable tool in that they equitably preserve the possibility of legal action against a person who engages in less than reputable behavior.