Constructive Fraud & Constructive Taking

Constructive Fraud: To methodically plan to deceive someone for the purposes to make money for products or services. The handmaiden to constructive fraud is "baiting," the customer to buy. CF always involves deception and a lack of intent to provide what is actually specified in a contract or advertisement. There is an important distinction between the legal definition of constructive fraud and the moral definition of constructive fraud. In the legal sense intent must be proven otherwise it is considered an unintentional concealment of a material fact. In the moral sense a person is judged in more general terms with an emphasis on patterns of deception or an ongoing history of skirting the law. Judgment comes from what is called constructive knowledge: If one by prudent behavior should have known a fact they are deemed having knowledge of that fact. A bank employee who deals with contracts has constructive knowledge that contracts are signed by a pen. The fact of having worked so long in the back would in some form acculturate the employee to the knowledge that contracts are signed by a pen and not a pencil.

A Misleading advertisement is a form of constructive fraud. There is no intention to offer the product or service for the price stated. The ad might offer Internet and phone service for $19.95 each but when the customers signs up of the service—and signs a two year contract—they find out it is actually $29.95 for each the first year. The second year the price goes up to $39.95 each. Here, the service provider has inserted in very small letters the words "with qualifying internet package," in the advertisement. Leading a client to false expectations is common where there is constructive fraud. Here the company offers the "symbol of good service or a good product" and not delivering on the "substance" of good service or a good product.

The words "constructive fraud" are being used here as a moral term and not a legal term. In law you cannot determine the planning of a fraud until there is a conviction. In a moral and ethical evaluation you can.

Constructive Taking.

To methodically plan to take from a person without their knowledge. Deception, concealment and the use of emotionally laden tactics to goad, coerce or persuade a person to do something against their financial interest. Constructive fraud is possible because human beings are creatures of habit. Clients have certain expectations about what they will receive in a transaction even though those expectations are not put in writing. Contractors know that construction contracts are complex. The contractor might say one thing but writes something entirely differently in the contract. If the construction company is a system house they have learned from years of experience how to guide the client's thinking at the time a contract is signed. There is a science to distracting clients in the signing process. Here the construction company intends to deceive the client to maximize their profits. They have "constructive knowledge" of how much the project will ultimately cost but they do not share that information with the client. Instead they gradually extract more and more concessions from the homeowner until they arrive at their target price. This is "constructive taking."

Example of constructive taking: You are planning a vacation and need a rental car when you arrive at your destination. You look up a rental agency and find a car for $16.50 a day. This indeed looks like a good deal because a rental at your local rental agency is $22 a day. The $16.50 car is being rented by a top rental company and has better cars. You make your reservation and so are committed to renting a car from that particular company. But this rental company is a system house company and they know that once a person makes a commitment they are not likely to break it. They know that when you arrive at the airport you want to get on your way. Again, they understand your situation and have carefully planned to exploit it. You arrive at the rental desk and ask in addition for insurance. It is $26 a day. The clerk tabulates the amount due and it comes to an amount 50% higher than expected. The clerk carefully explains all the hidden costs. You are committed and anxious to get on your way. They now want what looks like $63.50 a day for the rental. You want to get on with your life so you sign for that amount. When you return the car you are greeted by a young parking lot attendant who tabulates your return ticket. Surprisingly they want an additional $21.50. The attendant knows nothing about the charges. You try to go to the counter to get an explanation but there is a line and you are weary from traveling and are not inclined to wait. The rental agency knows you are tired because they have studied the habits of many clients. You are in a weakened position and do not put up a fight. Later you find out there was a cleaning fee for leaving a business card on the front seat and other frivolous charges. In the end you pay $85 for a car that was supposed to have cost $16.6 plus $26. What has happened is that the rental agency has fatigued you into compliance with their demands. They have constructively taken money from you because they have done their research well in advance. This is not ethical because they have deceived you, misled you and lied to you to make extra money.