Affirmative Defenses to Fraud

A guide by the Rozhik Law Firm

Occasionally, there are legal excuses for a lawsuit or legal action brought against you. These legal excuses are called affirmative defenses. Even in fraud cases, if the elements of disproving a fraud case are met by legal excuses, you can use an affirmative defense to defend yourself against legal action. Read on to learn more about affirmative defenses and what constitutes a legal suit for fraud.

What is an Affirmative Defense?

An affirmative defense to a civil fraud lawsuit is a fact or set of factual circumstances other than those alleged by the plaintiff, which, if thoroughly and sufficiently proven by the defendant, defeats or mitigates the legal consequences of the defendant’s otherwise unlawful conduct. A mitigation of civil legal consequences means the defendant may not owe any damages to the plaintiff if the defendant were to win. Facing time in jail or becoming incarcerated as a result is not a consideration for Civil charges.

You can think of an affirmative defense as a “Yes, I did [unintentionally] commit [fraud], but…” and then you would supply your affirmative defense as a reason as to why you unintentionally committed fraud.

An individual asserting their facts as to an affirmative defense must fully flesh out their defense to their civil lawsuit and have a complete answer to the claims against them. A defendant- or the person answering the civil lawsuit,  will only prevail on an affirmative defense if every single element in the answer is proven beyond a reasonable doubt.

What is Fraud?

The Court found under New York Univ. v Continental Ins. Co., 87 N.Y.2d 308, 318 that for a plaintiff to prevail on a fraud claim, in action to recover damages for fraud, the plaintiff must prove:

• a misrepresentation or a material omission of fact which was false;
• it was known to be faulty by the defendant,
• it was made for the explicit purpose of inducing the other party to rely upon it,
• There was a justifiable reliance of the other party on the misrepresentation or material omission,
• and an injury

Under New York State law, the plaintiff, or the person bringing the action in Civil Court, must argue each of the above elements of fraud in a specific fashion in order to prevail in a court hearing for fraud. This means that all five of the above arguments must be fully fleshed out and proven in a court of law to prevail. Meeting four out of the five elements would not be sufficient in order to prove fraud against the defendant and have the defendant then owe damages as a result of the fraud.

What are some Affirmative Defenses to Fraud?

The following can be used as an affirmative defense to a fraud case initiated against a defendant in a New York Civil Court. Remember, to prevail on an affirmative defense to fraud; you must utilize your affirmative defense to thwart the judgment away from the plaintiff successfully; you must prove every single element of a fraud charge, including disproving a false fact, negating that it was known to you, debunking that the fact was made for the explicit purpose, refute that there was a justifiable allowance, and discredit that there was an injury that occurred. Some affirmative defenses against fraud can include the following:

• Duress

A contract will not hold up in a Civil Court of law in New York state and other jurisdictions if it can be proven that the contract was signed under duress or a threat of violence. For example, if someone were blackmailing you into signing a contract, this would constitute a form of duress, and the contract would no longer be enforceable, much less fraud.

• Bankruptcy

Bankruptcy, or lack of sufficient funds by an individual or a company, is an affirmative defense to fraud. There is an exception to this affirmative defense; however, if this was explicitly stipulated in the contract as being a warranty, such as “By signing this contract, I agree that I or my business is not bankrupt before entering this contract.”

• Estoppel

The legal doctrine of estoppel states that a person or a party of a contract is precluded from asserting a right against the other if there is a reasonable belief that the legal right or obligation would not be asserted. For example, if it is common to wait 24 hours after a snowstorm to start plowing, and the plow typically starts right at hour 20, and this has continued for some years, the person wanting the snow plow removal services does not have the right to claim that the person responsible for the snow plowing started “too early.” The person performing the snow plow removal services would then be able to utilize the legal doctrine of estoppel to prevent unnecessary legal claims for early snow removal, if necessary, against a contract dispute.

• Illegality

If the contract was at any time or becomes illegal, this is an affirmative defense to stop performing services or actions for the contract.

• Impossibility

If an unanticipated event occurred during the contracted terms and rendered the contact impossible to continue, this would constitute the affirmative defense of impossibility. For example, the Covid-19 health crisis may have constituted an “impossibility” that was not foreseen that could become an affirmative defense to a fraud claim of a social activity contract.

• Lack of Consideration

A contract that lacks consideration or if the benefit that each party derives from the contract is missing or no longer possible would constitute the affirmative defense of lack of consideration. For example, if an agreement were going to pay out of one of the parties with a cryptocurrency that is no longer available to trade or utilize in New York state, then this would constitute a lack of consideration to the contract.

If you have any concerns over potential fraud or have a possible agreement or contract dispute in New York State, the knowledgeable and experienced attorneys at The Rozhik Law Firm are available to help you. Call them today at (917) 567-1963 for a free consultation.