When discussing the legal concept of fraud, there is an important distinction between intrinsic and extrinsic fraud. Intrinsic fraud involves a wrongful or deceptive act that goes to the very heart of a legal transaction. It is an act that is so corrupt that it thwarts the purpose of the contract or agreement, the basis of which was to be mutually beneficial for both parties.
In contrast, extrinsic fraud is a fraud that is outside the terms of the contract. Whereas intrinsic fraud is directly aimed at subverting the contractual process, extrinsic fraud generally seeks to conceal knowledge from the other party that would have prevented the contract from being made.
Understanding Intrinsic Fraud With Modern Examples
Today, intrinsic fraud is often discussed in terms of identity theft or forgery. When a legal transaction is entered into under false pretenses due to a third party assuming the identity of one of the parties to the contract, the transaction is said to be marred by intrinsic fraud. Another example would be filing a false document with a government agency that allows for the parties to circumvent a law or regulation.
In each of these examples, the fraudulent activity goes to the very heart of the agreement or transaction and thwarts its purpose. It is for this reason that courts view intrinsic fraud much more seriously than extrinsic fraud, as it is not a mere matter of one party being deceived but an actual subversion of the contract itself.
The Consequences of Intrinsic Fraud
Given the serious nature of this type of fraud, courts have established significant recourse for victims of intrinsic fraud. Depending on the circumstances of the case, this can range from a finding of breach of contract to criminal penalties. As such, when engaging in any type of legal transaction, it is important to be aware of the possibilities of intrinsic fraud and take the necessary steps to protect yourself.