Is taking advantage of someone else&#39;s lack of knowledge considered a fraud?
<p>Say, Person A owns a rare postage stamp which is worth 2000€ according to the stamp collector community, but A doesn't know the worth.</p>

<p>Person B sees that A has a rare stamp and offers to buy it for a fraction of its worth. B offers A 100€ for the stamp and A agrees happily.</p>

<p>Later, A finds out the true value of the stamp and wants it back. A claims that B scammed them.</p>

<p>Is B guilty of fraud, simply for not telling A how much the stamp is worth?</p>

<p>UK-based answer here:</p>

<p>The crux of your question revolves around whether the buyer(B) had committed an illegal act by <strong>withholding information</strong> that would have prevented the seller(A) from selling the good at the price he did. The act that B would seemingly be guilty of would be <em>fraudulent misrepresentation</em></p>

<p>A misrepresentation is a <em>false statement</em> of fact or law which <em>induces the representee to enter a contract</em>.</p>

<p>The important thing here is if there is a "false statement".</p>

<p>In your scenario, there was <strong>no false statement made</strong>, let alone one which induced A into selling his stamp to B.</p>

<p>So there is no fraudulent misrepresentation, or misrepresentation of any kind.</p>

<p>Looking at the law of fraud:</p>

<p>s3 Fraud Act 2006: A person commits fraud by failing to disclose information when =></p>

<p>The defendant: </p>

<ol>
<li>failed to disclose information to another person </li>
<li>when he was under a legal duty to disclose that information </li>
<li>dishonestly intending, by that failure, to make a gain or cause a loss.</li>
</ol>

<p>With regards to the scenario you've given, no fraud would have been committed because the buyer was under no legal duty to disclose such information</p>

<p>In general, the "value" of anything is the price a buyer and seller agree on - if one has knowledge the other doesn't, that is not fraud. Fraud requires a deliberate deception - if, in response to a direct question from the seller, the buyer were to state that the stamp was not valuable, <em>knowing that it is</em>, then they have committed fraud.</p>

<p>I agree with Shazamos's result, but not with his reasoning. B's offer contains several statements: of fact and opinion.</p>

<p>First, by offering A 100€, B expresses his current intention to enter into a legally binding contract with A in regard to the stamp. By accepting the offer, one can infer that A was induced by this statement. However, the statement is true, as stamp and money changed hands.</p>

<p>Second, B's offer implies that the stamp is worth 100€. Despite the market value of the stamp being considerably higher, this statement is true, because B only expresses that the stamp is <em>at least</em> 100€ worth to him personally. By contrast, where B is a professional stamp collector, who knows the market value of the stamp, and A relies on B's expertise, the result maybe different.</p>

<p>In conclusion: without holding himself as an expert to A, B did not fraudulently misrepresent to him.</p>

<p>Under U.S. law, the answer is somewhat similar to the one given by @ShazamoMorebucks but there are additional prerequisites for the transaction to be considered a <em>fraud</em> or scam.</p>

<p>One <em>prima facie</em> element of fraud is A's <em>reasonable reliance</em> on B's representation. Here, A and B are on the opposite sides of a contract, whence it is evident and expected that each party will pursue his own interest. In this context of competing interests, it was not reasonable for A to rely on B's statements (absent any guarantee or objective assurance given by B). Moreover, B did not even state that the stamp is worth 100€: He merely offered 100€ to A in exchange for the stamp.</p>

<p>Another <em>prima facie</em> element of fraud is that A <em>incurs a loss</em> as a result of B's representation. ShazamoMorebucks refers to the absence of a legal duty of disclosure, but I take a different approach:</p>

<p>It is wrong to conclude that A incurred a loss at all. Up until the transaction, A underestimated his stamp to the extent that he "<em>agree[d] happily</em>" when B offered 100€ in exchange for the stamp. A's reaction and decision show that A deemed the transaction profitable. The fact that A later realized he could have asked more money does not render the transaction an instance of fraud.</p>

fraud