Section 15 Direct Fraud

• Library: Remedies 2006

Direct fraud requires proof of nine elements:

1. A representation
2. Its falsity
3. Its materiality
4. The speaker’s knowledge of the falsity or ignorance of the truth
5. The speaker’s intent that the statement should be acted on by the other party in a manner reasonably contemplated
6. The hearer’s ignorance of the falsity
7. The hearer’s reliance on the representation as true
8. The hearer’s right to rely on the representation
9. Injury to the hearer that was proximately caused by the speaker’s representation

Emerick v. Mut. Benefit Life Ins. Co.,756 S.W.2d 513 (Mo. banc 1988); Heberer v. Shell Oil Co., 744 S.W.2d 441 (Mo. banc 1988). This chapter focuses on the elements of the speaker’s intent and the representation as they relate to rescission and cancellation.

Aside from being the difference between direct and constructive fraud, intent has been an area of significant controversy
within the province of direct fraud cases. Proving the intent
to defraud can be very difficult, and courts have allowed litigants to make a case of direct fraud by using circumstantial evidence to create an inference of the requisite intent. In the past, courts have used the so-called “indicia” or “badges of fraud” as circumstantial evidence to find the requisite intent to defraud. SeeBlakeley v. Bradley, 281 S.W.2d 835 (Mo. 1955); Chesus v. Watts, 967 S.W.2d 97 (Mo. App. W.D. 1998). Some examples of this...