Understanding Fraud in Virginia: A Guide to Fraud Claims, Defenses, and Legal Complexities

 Posted on May 01, 2025 in Business

At Fox & Moghul, we pride ourselves on being Virginia’s premier fraud litigation attorneys, with extensive experience in business fraud, real estate fraud, and consumer fraud cases. Fraud claims are notoriously difficult to prove, and many lawyers fail to grasp the nuances of actual vs. constructive fraud, reasonable reliance, and fraudulent concealment under Virginia law. This comprehensive guide explains the legal elements of fraud, case law precedents, and common pitfalls that could derail your claim.

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1. What Is Fraud Under Virginia Law?

Fraud is a deceptive act or misrepresentation made with the intent to induce another party to act to their detriment. Fraud is not the same as breach of contract; it requires an intentional or reckless misrepresentation that results in actual harm.

2. Actual Fraud vs. Constructive Fraud

There are two types of fraud recognized under Virginia law:

Type of Fraud	Definition	Intent Required?
Actual Fraud	Intentional misrepresentation of material facts to deceive another party.	✅ YES
Constructive Fraud	A negligent or reckless misrepresentation that leads to harm, even if there was no intent to deceive.	❌ NO

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3. Elements of Fraud Under Virginia Law

A plaintiff must prove each of the following elements to succeed in a fraud claim:

1. False Representation – A false statement of fact.

2. Material Fact – The statement must be significant enough to influence a party’s decision.

3. Intentional or Reckless Misrepresentation – The defendant must have knowingly or recklessly made the misstatement.

4. Intent to Mislead – The statement was made to induce reliance.

5. Reasonable Reliance – The plaintiff reasonably relied on the misstatement.

6. Damages – The plaintiff suffered actual harm as a result.

Case Law: Evaluation Research Corp. v. Alequin, 247 Va. 143, 148 (1994) establishes that fraud must be proven by clear and convincing evidence, a higher standard than typical civil cases.

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4. Statute of Limitations: Virginia Code § 8.01-243(A)

Virginia law imposes a two-year statute of limitations for fraud claims. However, Virginia applies the Discovery Rule, which means the clock starts ticking only when the fraud is discovered (or should have been discovered through due diligence).

Case Law: STB Mktg. Corp. v. Zolfaghari, 240 Va. 140, 144 (1990) defines "due diligence" as the level of investigation a reasonable and prudent person would undertake under the circumstances.

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5. What Statements Constitute Fraud?

A. Fraud Cannot Be Based on Future Promises

Fraud claims cannot be based on unfulfilled promises or future events. Otherwise, every breach of contract would become a fraud case.

Case Law: Lloyd v. Smith, 150 Va. 132, 145 (1928) established that fraud must be based on present or pre-existing facts.

❌ Example of Non-Fraudulent Statement:
"I promise to build you a house by next year." (This is a contract, not fraud.)

✅ Exception – Present Intent Not to Perform:
If the promise is made with no intention of performing, it can be fraud.

Case Law: Boykin v. Hermitage Realty, 234 Va. 26 (1987) – A fraudulent promise is actionable if the speaker never intended to perform it at the time it was made.

B. Fraud Cannot Be Based on Opinion

Statements of opinion, predictions, or "puffery" generally do not qualify as fraud.

Case Law: Barnes v. Barnes, 207 Va. 114 (1966) held that "statements of opinion" are not actionable unless made by someone with specialized knowledge that the other party lacks.

❌ Example of Non-Fraudulent Statement:
"This car is amazing! You’ll love it."

✅ Exception – Expert Opinions Can Be Fraudulent

If a person in a position of expertise makes a false statement of opinion to induce reliance, it can be fraudulent.

Case Law: Environmental Staffing Acquisition Corp. v. Beamon Enters., 2011 Va. Cir. LEXIS 65 (Portsmouth Cir. Ct.) – A party with superior knowledge can be liable for fraud even if the misrepresentation was an opinion.

Virginia Business Lawyer Example:

• NOT FRAUD: A homeowner selling their home says, "This house has a solid foundation!"

• FRAUD: A licensed structural engineer knowingly lies about the house’s foundation.

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6. Fraud vs. Breach of Contract

A breach of contract is not fraud unless it involves intentional deception.

Case Law: Richmond Metro. Auth. v. McDevitt Street Bovis, Inc., 256 Va. 553 (1998) held that misstatements related to contractual duties are not fraud.

Virginia Business Lawyer Example:

• NOT FRAUD: A contractor fails to complete a renovation on time.

• FRAUD: A contractor falsifies invoices to obtain payment for work never performed.

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7. Fraudulent Concealment – When Silence is Fraud

Sometimes, failure to disclose a material fact can be fraud if the defendant knew the plaintiff was acting under a false assumption.

Case Law: Allen Realty Corp. v. Holbert, 227 Va. 441 (1986) held that deliberate nondisclosure can be as fraudulent as an affirmative lie.

Virginia Business Lawyer Example:

• FRAUD: A seller fails to disclose that a property is located on a toxic waste site while knowing that the buyer believes it is safe.

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8. Proving "Reasonable Reliance"

A fraud claim requires that the victim reasonably relied on the misrepresentation. However, blind reliance does not qualify.

Case Law: Hitachi Credit Am. Corp. v. Signet Bank, 166 F.3d 614, 629 (4th Cir. 1999) – A plaintiff cannot claim fraud if they had the means to discover the truth but failed to investigate.

Virginia Business Lawyer Example:

• FRAUD: A seller provides fake financial statements to mislead a buyer.

• NOT FRAUD: A buyer ignores available financial reports and later claims fraud.

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9. Fraud Damages – What Can You Recover?

Virginia law allows fraud victims to recover:

1. Compensatory Damages – To restore the plaintiff to their original financial position.

2. Punitive Damages – Awarded in cases of willful deception.

3. Attorney’s Fees – Recoverable in some cases.

Case Law:

• Jordan v. Sauve, 219 Va. 448 (1978) – Punitive damages awarded for egregious fraud.

• Prospect Dev. Co. v. Bershader, 258 Va. 75 (1999) – Attorney’s fees awarded in fraudulent inducement cases.

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10. Contact Fox & Moghul – Virginia’s Premier Fraud Attorneys

Fraud cases require precise legal strategy, and not every misleading statement qualifies as fraud. At Fox & Moghul, we specialize in fraud litigation, handling cases involving business fraud, real estate fraud, and investment fraud.

Call us today for a consultation!
Contact Virginia’s leading fraud attorneys now.