Fraud and Misrepresentation

While most parties entering into a contract do so with good intentions, sometimes individuals or companies commit business fraud or misrepresentation to induce a transaction to go through. When this happens, serious financial consequences and legal actions inevitably follow.

The most common type of business fraud occurs when one party agrees to provide goods or services knowing they are unable or unwilling to meet their obligations. If your business has incurred significant losses due to the deception of another person or business, a business fraud attorney is the best resource to help your business recover. Moreover, if you have been wrongly accused of business fraud or misrepresentation, a business fraud lawyer can defend you against damaging claims.

Business Fraud Costs Billions

A brief look at the past few decades reveals the rise of business fraud worldwide, costing companies billions of dollars annually. In 2020 alone, PWC estimated $42 billion in losses for all companies collectively due to business fraud, with nearly 15% of those loses soaring above the $50 million dollar mark.

In fact, nearly half of all businesses have experienced some type of business fraud in the past two years according to the same research. The Association of Certified Fraud Examiners (ACFE) reports the average company loses more than $1.5 million to fraud. With these types of massive numbers, business owners cannot afford to defer investigations and must actively pursue legal options to recover their losses from the constant barrage of business fraud.


It is important to understand that in order to bring a fraud claim in Texas, you must prove the defendant knowingly or recklessly made a false claim of fact that was significant enough to cause you to:

  1. rely on their claim enough to act or not act on it, and
  2. suffer injury or damages because you relied on their claim.

Common Examples of Business Fraud:

  • Conspiracies
  • Intentional contract breaches
  • Negligence in upholding contracts
  • Embezzlement
  • Employment-related fraud
  • Fraudulent concealing of facts
  • Securities fraud

Corporate fraud has a whole range of dishonest variations as well including:

  • Falsifying accounting and financial statements to secure funding, and/or mislead investors
  • Misrepresenting services of products
  • Selling fraudulent goods
  • Hiding losses in shell companies
  • Ponzi schemes
  • Falsifying other business documents


Like any reasonable person, you or your business trusted another party to give you accurate information to the best of their knowledge and act according to the agreements made in a contract or transaction. In Texas, when someone knowingly makes a false representation with the intention to induce others to take action based on these claim(s), that is considered a material misrepresentation. In order for a claim to be valid, it must meet the following criteria:

  • One party must make a false representation of facts
  • The misrepresentation must be relevant to the transaction or contract
  • The misrepresentation must have been made knowing it was false or with reckless disregard for whether or not it was true
  • The misrepresentation must have been made to induce the other party into action or inaction
  • The other party must have relied on the misrepresentation
  • The other party must have suffered damages as a result of the misrepresentation

Fraudulent Misrepresentation

Fraud and misrepresentation can also include the failure to mention or disclose information regarding the transaction, known as nondisclosure fraud.

Regardless of the type of misrepresentation, the injured party must be able to show reasonable reliance, or that reliance on the misrepresented fact was reasonable. Additionally, you must show you would not have entered into the contract or transaction had you known the misrepresentation was false.

Business Fraud Attorneys

If you relied on false information from another party or business, such as a realtor, supplier, or consultant, to make significant business decisions that resulted in losses, you may be able to pursue a business fraud lawsuit.

Oftentimes, the remedy for fraud and/or misrepresentation is the voiding of the contract. However, there are many other available potential damages, including:

  • Monetary damages for the losses incurred
  • Punitive damages
  • Attorney fees
  • Bargain damages, or what they would have received if the other party had performed as promised
  • A claim under the Texas Deceptive Trade Practices-Consumer Protection Act to be compensated for punitive damages, mental anguish, legal fees, and other noneconomic damages

Houston Business Fraud Lawyer

Ultimately, the best course of action for you or your company can only be determined after discussing the full details of your situation with an experienced and competent business attorney. The business fraud lawyers at Adair Myers Stevenson Yagi are aggressive litigators with decades of experience in business law.

When you are deciding to speak with an attorney regarding fraud and misrepresentation, it is important to consider the statute of limitations for fraud in Texas. The opportunity to file suit is limited to four years from the date the misrepresentation occurred. This legally mandated deadline can be extended if the misrepresentation was discovered at a later date; however, this can be uncommon and should therefore only be determined by a qualified attorney.

Please do not hesitate to contact us if you or your business have been the victim of fraud or misrepresentation or if you are facing unfounded allegations of fraud. Our attorneys have a broad depth of business law experience in Texas backed by successful litigation results. We are confident we can help you understand your legal options. Contact us today to discuss your case.