Legal Definitions - fraus legis

Fraus legis is a Latin term that translates to "fraud on the law." It describes a situation where an individual or entity acts in a way that technically complies with the exact wording of a law, but deliberately undermines or circumvents the underlying purpose, spirit, or intent of that law. Essentially, it involves exploiting a loophole to achieve an outcome that the law was designed to prevent, even if no specific prohibition is directly violated.

Here are some examples to illustrate this concept:

• Example 1: Tax Avoidance Scheme

  Imagine a country has a law imposing a significant tax on the direct sale of luxury yachts to discourage excessive consumption. A wealthy individual wants to acquire a luxury yacht without paying this tax. Instead of buying the yacht directly, they establish a shell company in a jurisdiction with no such tax, and that company purchases the yacht. The individual then leases the yacht from their own shell company for a nominal fee, effectively gaining full use and control of the yacht without ever technically "buying" it in the jurisdiction with the high tax.

  How it illustrates fraus legis: The individual technically avoids the "sale" that triggers the tax. However, the *spirit* of the law was to tax the acquisition and use of luxury assets within the country. By using an offshore shell company and a lease arrangement, the individual achieves the economic outcome of owning and using the yacht while circumventing the clear intent of the tax law.

• Example 2: Environmental Regulation Evasion

  A local ordinance prohibits the disposal of industrial waste directly into a river to protect water quality. The ordinance specifies "industrial waste" as a byproduct of manufacturing processes. A factory, wanting to avoid the cost of proper waste treatment, discovers that a certain liquid byproduct, while harmful, is technically classified as "effluent from a cooling system" rather than "industrial waste" under a very narrow definition in the law. They then discharge this harmful "cooling system effluent" directly into the river.

  How it illustrates fraus legis: The factory technically adheres to the letter of the law by not discharging "industrial waste." However, the *purpose* of the ordinance was to prevent harmful substances from polluting the river. By exploiting a narrow definition to discharge a harmful byproduct, the factory commits a "fraus legis" because it evades the environmental protection intent of the regulation.

• Example 3: Property Transfer to Avoid Restrictions

  A town has a zoning law that prohibits the subdivision of a certain large parcel of land into smaller lots for residential development, aiming to preserve open space. A developer wants to build multiple homes on this parcel. Instead of subdividing the land, the developer sells "shares" in a newly created cooperative corporation that owns the entire parcel. Each "share" grants the holder exclusive rights to build and occupy a specific house on a designated portion of the land, effectively creating individual residential units without technically subdividing the property.

  How it illustrates fraus legis: The developer technically avoids "subdividing" the land, as the cooperative corporation remains the single legal owner of the entire parcel. However, the *intent* of the zoning law was to prevent the creation of multiple residential units on that specific land to maintain open space. By using a cooperative structure, the developer achieves the practical outcome of multiple residential units, thereby undermining the purpose of the zoning regulation.