Could You Be Entitled to Damages for Constructive Fraud?

Under Texas law, there a few reasons you can pursue a fraud claim. Among them is an assertion of constructive fraud. As it pertains to contract law, allegations of constructive fraud may result in an award of monetary damages.

First, let’s make a distinction between terms. A cause of action for constructive fraud is different than one for actual fraud. First and foremost, with constructive fraud claims, there is no requirement to demonstrate a party’s dishonesty. In fact, you do not even have to prove that someone was acting with ill intent.

Notwithstanding, there is one key element of all constructive fraud that is essential in commercial litigation matters. There must be proof of a fiduciary duty. In fact, constructive fraud is considered a breach of fiduciary duty.

As an aside, that’s not to say you cannot pursue a claim for damages if there was intentional malice associated with the fraudulent acts. The difference is that this cause of action would be premised on actual fraud.

A 1964 Texas court opinion distinguishes the two by citing encyclopedic references as follows: “Actual fraud usually involves dishonesty of purpose or intent to deceive, whereas constructive fraud is the breach of some legal or equitable duty which, irrespective of moral guilt, the law declares fraudulent because of its tendency to deceive others, to violate confidence, or to injure public interests.”

Texas Law and Constructive Fraud

No doubt the whole distinction between constructive fraud and actual fraud may sound like splitting hairs to most. For this reason, it is always important to seek legal advice from an experienced commercial litigation attorney if you suspect someone has breached their fiduciary duty to you in a business matter.

Of course, there are a number of Texas cases where the court awarded damages based on claims of constructive fraud. Here are just two examples that might constitute a breach of fiduciary duty that represents a fraud claim not based on intentional dishonesty:

  • Real Estate: Real estate investor is looking for property solely for income revenue. Buyer’s agent misrepresents revenue potential and purchase results in a loss attributable to the false The agent had a fiduciary duty to provide the client with accurate information.
  • Business Transactions: Sale of business is based on certain representations. Seller fails to unintentionally disclose issues that might have stopped the buyer from making an investment.

Contact Us

Have you suffered damages and suspect some aspect of fraud was involved? At Manfred Sternberg and Associates, we can help sort out your claim and let you know if there is a legal course of action. Contact us to schedule an appointment!

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