Fraud in the factum is a type of fraud where misrepresentation causes one to enter a transaction without accurately realizing the risks, duties, or obligations incurred. This can be when the maker or drawer of a negotiable instrument, such as a promissory note or check, is induced to sign the instrument without a reasonable opportunity to learn of its fraudulent character or essential terms.
Misrepresentation that results in entering a transaction with insufficient understanding of risks, duties, or obligations can be categorized as fraud in the factum. This often occurs when the maker or drawer of a negotiable instrument such as a promissory note or check is misled into signing it without adequate time to recognize its fraudulent characteristics or essential terms.