Legal Definitions - collateral fraud

Collateral Fraud

Collateral fraud is a type of fraud that involves intentionalmisrepresentation or deceptive behavior outside of a transaction or contract, which deprives one party of informed consent or full participation. It is also known as extrinsic fraud.

• A person convinces a litigant not to hire a lawyer or answer a lawsuit by dishonestly saying the matter will not be pursued.
• A seller of a property intentionally conceals information about the property's defects, causing the buyer to suffer financial loss.

These examples illustrate how collateral fraud involves deception that occurs outside of a transaction or contract, which causes harm to the other party. In both cases, the party committing the fraud intentionally misrepresents the truth to induce the other party to act to their detriment.