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Fletcher Reede is a lawyer and divorced father living in Los Angeles. He loves spending time with his young son Max; they often play a game where Fletcher makes his hand into "the Claw", with which he tickles Max and pretends to chase him. However, Fletcher has a habit of giving precedence to his career, breaking promises to Max and his former wife Audrey, and then lying about the reasons. Fletcher's compulsive lying has also built him a reputation as a successful defense lawyer at his firm. On Max's birthday, Fletcher misses Max's party when senior partner Miranda lures him to get promoted by having sex in the office. Max makes a birthday wish that Fletcher would be unable to tell a lie for an entire day—a wish that immediately becomes true.

Fletcher soon discovers, through a series of embarrassing incidents, that he is unable to lie, mislead, or even withhold a true answer. These incidents are inconvenient, ranging from being dumped by Miranda after his honest review about their one night stand, alienating his secretary Greta when she realizes his law practices have hampered true justice, and his inability to bend the truth in court. His client is Samantha Cole, a gold digger who wants a nut from her soon-to-be ex-husband Richard Cole. The main witness, Kenneth Falk, with whom Samantha has been cheating, is eager to commit perjury to win, but Fletcher discovers that he cannot even ask a question if he knows the answer will be a lie. Meanwhile, Audrey is planning to move to Boston with her new fiancé Jerry, and decides to take Max with them to protect him from the disappointment Fletcher causes him when he breaks his promises.