Misrepresentation: What Does it Mean?

A misrepresentation is a false statement of fact which induces a party to enter into a contract.

When going into a contract, there will often be opinions given such as forecasts. An incorrect opinion will not be found to be a misrepresentation. However, there are exceptions to this rule which include, but are not limited to, where it is found that an opinion was not genuinely held and the other party relied upon it, this would be misrepresentation.

Another common theme of contracts would be implied representations. The court would have to consider “what a reasonable person would have inferred was being implicitly represented by the representor’s words and conduct in their context”. For example, if a party is aware that they are going to come under financial strain that it would make the conditions of contract impossible to uphold but does not make the other party aware, this would be misrepresentation through implied representation.

A key point is that silence alone does not constitute as misrepresentation but where a party doesn’t disclose information or gives statements of “half-truth”, this may lead to a misrepresentation claim being successful.

There are three different types of misrepresentation.

Fraudulent Misrepresentation

The defendant makes a false representation to the claimant.

The defendant knows that the representation is false, alternatively, it is reckless as to whether it is true or false.

The defendant intends that the claimant should act in reliance on it.

The claimant does act in reliance on the representation and, in consequence, suffers loss.

Negligent Misrepresentation

Occurs where a statement is made by one contracting party to another carelessly or without reasonable grounds for believing its truth

Once statement is proven to be false, the representor then has the burden of proof that they believed the statement to be true.

Innocent Misrepresentation

This would be the outcome if the representor can prove that they had reasonable grounds to believe the statement was true.

There are different remedies available to the claimant, depending on the type of misrepresentation which has taken place. This is often nuanced and so it is advisable to seek legal advice when dealing with representations in a contract. Should you need to speak to an expert, contact the Quigg Golden team here.