Houston Business Fraud & Misrepresentation Attorneys

Business fraud and misrepresentation can threaten your company's finances, relationships, and reputation – sometimes overnight. Whether you are pursuing claims against a party who deceived you or defending against fraud allegations, Hendershot Cowart P.C.'s Houston-based business fraud attorneys represent companies and individuals in fraud, misrepresentation, embezzlement, forgery, and related disputes across Texas.

When business fraud threatens what you've worked to build, how quickly you act matters. Our experienced Houston business fraud attorneys are ready to assess your situation, explain your options, and help you take the right next steps. 

On This Page:

• What Is Business Fraud?
• Types of Business Fraud and Misrepresentation Claims
• Other Causes of Action Commonly Brought with Fraud Claims
• Proving Fraud and Misrepresentation
• Take a Stand Against Business Fraud
• Defending Against Fraud Allegations

Call (713) 783-3110 or contact us online to schedule your consultation.

What Is Business Fraud Under Texas Law?

Under Texas law, fraud occurs when someone knowingly – or recklessly – makes a false statement about a material fact to get you to act, and you suffer real harm as a result of relying on that statement.

But not every false statement requires intent. Negligent misrepresentation – where the defendant simply failed to exercise reasonable care – and constructive fraud – where the defendant’s conduct breaches a special duty owed to the plaintiff – can give rise to legal claims even without proof of deliberate deception.

Understanding which theory applies, and whether multiple theories can be pleaded together, is one of the most important strategic decisions in a Texas fraud dispute.

Types of Business Fraud and Misrepresentation Claims in Texas 

Texas courts recognize several distinct grounds to sue for fraud and misrepresentation, each with its own elements, available remedies, and litigation considerations. 

Here are the primary claims and key considerations for each:

Fraudulent Misrepresentation

When someone deliberately lies to you to gain a business advantage, Texas law gives you a powerful remedy. Fraudulent misrepresentation – what Texas courts call "actual fraud" – occurs when another party makes a false statement of material fact, knows it is false (or makes it recklessly without regard for the truth), and intends for you to act on it to your detriment. 

To prevail in a fraudulent misrepresentation claim, a plaintiff must prove all 5 of the following (the absence of even one will defeat the claim):

1. The defendant made a material misrepresentation of fact
2. The representation was false, and the defendant either knew it was false or made it recklessly without knowing whether it was true
3. The defendant intended for the plaintiff to act on the representation
4. The plaintiff justifiably relied on the representation
5. The plaintiff suffered damages as a result

If you relied on that misrepresentation and suffered financial harm as a result, you may be entitled to recover economic damages, mental anguish damages, and exemplary damages.

Fraudulent Inducement

Fraudulent inducement arises when someone convinces you to enter into a contract by making material misrepresentations or omissions – or by promising to perform while having no intention of following through. 

What makes this claim particularly powerful under Texas law is that it can survive even when a binding contract exists between the parties. While a mere failure to perform a contract does not amount to fraud, a pattern of misrepresentations that induced you to sign on the dotted line is a different story. 

A successful fraudulent inducement claim can entitle you to rescind the contract entirely or to pursue tort damages – including, in some cases, exemplary damages – that are not available in a standard breach of contract action.

Fraud by Nondisclosure

Not all fraud involves an outright lie. Sometimes, the most damaging deception is a deliberate silence. Fraud by nondisclosure – also called fraudulent concealment – occurs when a party with a duty to disclose material facts intentionally withholds information you needed to make an informed business decision. 

Texas courts recognize this duty in certain circumstances: when one party has superior knowledge the other cannot reasonably discover on their own, for example, or when a special relationship exists between the parties. 

If you were left in the dark about facts that would have changed your course of action, and you suffered harm as a result, you may have grounds to pursue this claim alongside – or instead of – other fraud causes of action.

Constructive Fraud

Constructive fraud does not require proof that the other party intended to deceive you. Instead, this claim applies when someone in a position of trust – such as a fiduciary, business partner, or corporate officer – makes a misrepresentation that breaches their special legal duty to you, regardless of their intent. 

Because the law holds those entrusted with authority to a higher standard, constructive fraud provides an important avenue for relief in business relationships where one party has power or influence over another. If a partner, officer, or manager abused their position to your financial detriment, our attorneys can evaluate whether a constructive fraud claim – along with potential breach of fiduciary duty claims – may be appropriate for your situation.

Negligent Misrepresentation

Negligent misrepresentation occurs when a party, in the course of their business or a transaction in which they have a financial interest, provides false information of existing fact without exercising reasonable care – and you suffer financial loss by relying on it. 

Unlike fraud, this claim does not require proof that the other party knew the information was false. It is important to note, however, that negligent misrepresentation carries a shorter two-year statute of limitations under Texas law, compared to the four-year window for common law fraud. 

If you believe faulty information from a professional, contractor, or business counterpart led you to make costly decisions, our attorneys can help you assess your options quickly.

Statutory Fraud in Real Estate and Stock Transactions

Texas provides an additional layer of protection for fraud committed in real estate and securities transactions through Texas Business and Commerce Code Section 27.01. This statute is significant because it lowers the burden of proof for plaintiffs – you do not need to prove the other party knew their representation was false or acted recklessly. You must show that a false representation of material fact, or a false promise to perform, was made to induce you to enter into a contract involving real estate or stock, and that you justifiably relied on it to your detriment. 

Statutory fraud carries the same four-year statute of limitations as common law fraud and can support claims for economic damages, exemplary damages, and – under certain circumstances – attorneys' fees, making it a particularly valuable tool in property and equity transactions gone wrong.

Other Causes of Action Commonly Brought with Fraud Claims

Breach of Fiduciary Duty

When a partner, corporate officer, LLC manager, or other person in a position of trust abuses that authority to benefit themselves at your expense, a breach of fiduciary duty claim may be your most direct path to accountability.

In Texas, this claim is closely intertwined with fraud – in fact, courts have held that a breach of fiduciary duty can constitute constructive fraud in its own right, regardless of whether the defendant intended to deceive you. Business fraud cases frequently involve both claims together, particularly in disputes involving dual-agent brokers, business partners engaged in self-dealing, or corporate insiders who diverted opportunities or assets for personal gain. 

Available remedies can include damages, forfeiture of ill-gotten gains, disgorgement of fees or profits, and constructive trusts – making this one of the most powerful tools available to defrauded Texas business owners.

Civil Conspiracy to Commit Fraud

Fraud is rarely a solo act. When multiple parties work together to deceive you – a business partner, a complicit third party, or an outside facilitator who knowingly plays a role in the scheme – Texas law allows you to pursue all of them through a civil conspiracy claim. 

To establish civil conspiracy to commit fraud, you must show that two or more persons reached a meeting of the minds on a course of action involving an unlawful act, and that you suffered damages as a result of their conduct. Civil conspiracy is a derivative tort, meaning it depends on the existence of an underlying fraud claim against at least one of the defendants. As a result, the strength of your underlying fraud claims directly shapes the viability of your conspiracy theory. 

This claim is particularly valuable because it allows you to reach defendants who may not have made the misrepresentation themselves but who participated in, facilitated, or benefited from the scheme.

Embezzlement and Misappropriation of Assets

When a partner, employee, or manager secretly diverts company funds or assets for personal use, the damage can be severe and the evidence, without swift action, fleeting. 

Texas law provides multiple civil remedies for embezzlement and misappropriation, including fraud claims when deliberate deception is involved, conversion (the civil equivalent of theft), breach of fiduciary duty, and breach of contract when the conduct violates a formal agreement. 

In addition to recovering the exact amount misappropriated plus consequential losses, you may be able to seek a temporary restraining order to freeze assets before they disappear, a court-ordered accounting to determine the full extent of financial irregularities, and in appropriate cases, exemplary damages. 

Forgery and Document Fraud

In business contexts, forgery and document fraud frequently surfaces in contract disputes, business acquisitions, real estate transactions, and estate matters – where fabricated signatures, altered agreements, or falsified financial records are used to manufacture rights or obscure the truth. 

Proving document fraud often requires forensic document examination and a thorough review of electronically stored information, making early evidence preservation critical to your case.

Bribery, Kickbacks, and Racketeering

When a business dispute involves corrupt payment schemes, improper referral arrangements, or organized patterns of fraudulent conduct, the legal landscape expands well beyond ordinary fraud claims. In civil litigation, bribery and kickback schemes can give rise to claims for breach of fiduciary duty, tortious interference, and in federal court, civil RICO (Racketeer Influenced and Corrupt Organizations Act) claims – which carry the potential for treble damages and attorneys' fees when a pattern of racketeering activity, such as wire fraud or mail fraud, is established. 

In healthcare and government contracting contexts, kickback arrangements may also trigger federal statutory liability under the Anti-Kickback Statute or the False Claims Act. 

Our attorneys understand both the civil and regulatory dimensions of these matters and can help you evaluate the full range of claims available when corruption underlies a business dispute.

Unjust Enrichment and Breach of Contract

When a fraudulent scheme allows someone to obtain money, property, or a business advantage at your expense, unjust enrichment gives you an additional avenue to recover what they wrongfully gained – even when a formal contract claim may not fully capture the scope of the harm. 

Texas courts recognize unjust enrichment as a companion claim in fraud cases, particularly when a defendant has benefited from a fraudulent scheme by excluding a party from distributions, diverting business opportunities, or retaining payments to which they had no rightful claim. Breach of contract claims are also routinely asserted alongside fraud, especially in fraudulent inducement cases – though Texas courts require plaintiffs to ultimately elect one remedy after trial, choosing whichever path affords the greatest recovery. 

Together, these claims ensure that no part of the damage a fraudulent actor has caused goes unaddressed, whether it flows from broken promises, unjust gains, or deliberate misrepresentation.

Proving Fraud and Misrepresentation in Texas

If you believe you have been defrauded, here is what Texas law requires you to prove:

• A material representation was made. The defendant made a statement of fact – not mere opinion, puffery, or a prediction about future events – that was significant enough to influence your decision.
• The representation was false. The statement did not reflect reality at the time it was made.
• The defendant knew it was false – or made it recklessly. The defendant either knew the statement was untrue or made it as a positive assertion without any knowledge of whether it was true.
• The defendant intended for you to rely on it. The misrepresentation was made with the purpose of inducing you to act – or to refrain from acting.
• You actually relied on the representation. You took action – or declined to take action – based on what the defendant told you.
• Your reliance was justifiable. Given your knowledge, sophistication, and the circumstances, it was reasonable for you to rely on the representation without further investigation.
• You suffered damages as a result. Your reliance caused you measurable financial harm.

You must establish every one of the following elements – Texas courts have consistently held that the absence of even a single element defeats the claim entirely.

Take a Stand Against Business Fraud in Texas

Getting each element right from the outset, and anticipating how the other side will attack them, is essential to building a viable fraud case. At Hendershot Cowart P.C., our business fraud attorneys work with Texas business owners to evaluate their claims, understand their exposure, and pursue the strongest available remedies.

When you bring a fraud claim in Texas, the remedies available to you depend on the theory you pursue and the facts you can prove. Depending on your circumstances, you may be entitled to recover:

• Economic damages – your actual out-of-pocket losses, or the benefit of the bargain you were fraudulently denied
• Consequential damages – financial losses that flow directly from your reliance on the misrepresentation, such as lost profits or additional costs incurred
• Exemplary damages – available for intentional fraud, these go beyond making you whole and are designed to punish deliberate wrongdoing
• Equitable relief – including rescission of a fraudulently induced contract, disgorgement of profits, constructive trusts, or injunctive relief to stop ongoing harm
• Attorneys' fees – recoverable in certain claims, including statutory fraud under Texas Business and Commerce Code Section 27.01

Because Texas fraud cases often involve overlapping causes of action – each with its own elements, limitations periods, and remedies – the claims you bring, and how you frame them, shape what you can ultimately recover. Choosing the right combination of claims from the start is one of the most consequential decisions in any fraud dispute.

We take a direct, strategic approach: assessing the strength of each potential claim, identifying the evidence needed to support it, and building a litigation strategy designed to pursue maximum recovery while anticipating the defenses the other side is likely to raise.

Your business is your livelihood. When someone has defrauded you, you deserve counsel that is prepared, tenacious, and committed to getting results. 

Call (713) 783-3110 or contact us online to schedule a consultation with a Hendershot Cowart business fraud attorney.

Defending Against Fraud Allegations in Texas

A fraud allegation – even one without merit – can put your reputation, finances, and business relationships at serious risk. Defending against these claims requires more than a denial; it requires a focused legal strategy that challenges the plaintiff's ability to meet their burden on every element of their claim.

At Hendershot Cowart P.C., our business litigation attorneys represent companies and individuals facing fraud allegations, regulatory investigations, and related civil claims. 

Common defense strategies we consider in our Texas fraud litigation strategies include:

• Challenging the elements of the claim. Because fraud requires proof of each element, targeting the weakest links in the plaintiff's case is often the most effective approach. 
• Asserting a contractual disclaimer of reliance. When sophisticated parties negotiate and sign a contract containing a clear disclaimer of reliance on extra-contractual representations, Texas courts may bar a fraudulent inducement claim based on that disclaimer. The Texas Supreme Court's five-factor test, established in IBM v. Lufkin Industries (2019), provides the framework for evaluating whether such a disclaimer is enforceable – and it remains one of the most powerful tools available to defendants in business fraud cases.
• Raising the statute of limitations. Common law fraud claims in Texas carry a four-year statute of limitations, while negligent misrepresentation claims must be brought within two years. When a plaintiff cannot show that they exercised reasonable diligence in discovering the alleged fraud, a limitations defense may resolve the case before it reaches the merits.
• Using the Texas Citizens Participation Act (TCPA). When a fraud claim is based on protected speech or conduct, Texas law allows a defendant to move to dismiss the case before discovery begins – putting the burden on the plaintiff to produce concrete supporting evidence early in the process. If they cannot, the case may be dismissed and the defendant may recover attorneys' fees.

Whether you are facing a fraud lawsuit, a demand letter, or a regulatory investigation tied to alleged misrepresentation, early and strategic legal counsel makes a measurable difference in your options and outcomes. Our business fraud defense attorneys are ready to evaluate the claims against you, identify your strongest defenses, and help you respond strategically – before the situation escalates.

Talk to a Houston Business Fraud Attorney

Business fraud and misrepresentation disputes require attorneys who understand both the legal claims and the business stakes. Whether you are pursuing a claim or defending against allegations, Hendershot Cowart P.C. represents businesses and individuals in complex fraud matters across Texas.

Call (713) 783-3110 or contact us online to schedule your initial consultation.