The meaning of fraudulent misrepresentation is a situation when a false statement is made intentionally or recklessly by a party, leading to another party agreeing to a deal of any kind and suffering a loss as a result of the above-mentioned false statement. Fraudulent misrepresentations in a business environment often result in major monetary losses. They also have the potential to affect final consumers when a company promises to deliver a product or a service at a certain standard and fails to do so.

Elements That Constitute Fraudulent Misrepresentation

For a case of fraudulent misrepresentation to be proven in a court of law, six conditions must be met:

  • A supposedly factual claim must be made by a party. It has to be a clear, unambiguous statement that is later proven to be untrue. For example, a statement such as “this car will reach 60 miles per hour from a standstill in just 5 seconds” coming from a car dealer can be a fraudulent misrepresentation. Vague statements like “this car will satisfy your entire family” will not fall under that category.
  • The statement must be untrue. If the car in the above example needs 6.5 seconds to reach 60 miles per hour, concrete evidence refuting the initial statement must be presented.
  • Whoever is making the statement knows it isn't true before making it. The person or company that makes a claim while knowing it is untrue meets this criterion for fraudulent misinterpretation. If the claim's accuracy is verifiable but the party that makes it has failed to properly check beforehand, it is equivalent to them knowing it is untrue.
  • The plaintiff used the false information to make a decision. Proving fraudulent misinterpretation is not only a matter of one party making false claims. The accusing party must prove that they agreed to a transaction while heavily relying on fraudulent information in order to make the decision. A consumer who buys a car that's falsely advertised as one that accelerates to 60 miles per hour in 5 seconds must prove that the car's acceleration was a major part in his or her decision to buy that car.
  • The claim was made with the specific purpose of misleading the plaintiff. It must be proven that the untrue statement was made with the goal of making the other party agree with a transaction of any kind that they would not have agreed to otherwise.
  • Also, the misrepresentation must result in an actual material loss by the plaintiff. Proving the loss and determining its value is very important, as it represents the amount of damages that can be claimed.

Types of Misrepresentation

A wrongful representation can be made using words or through the absence of words. Furthermore, misrepresentations through words can be of two different kinds. The first is a straightforward situation where someone makes a false affirmation. The second kind is when a party only presents a part of the whole context, intentionally omitting certain facts that would have changed the statement's entire meaning. In other words, half-truths can be wrongful misrepresentations.

The second type of misrepresentation is through silence, which is a situation where a party fails to disclose certain facts. Silence usually cannot constitute fraud. However, it does qualify as fraudulent misrepresentation when there is a legal obligation to communicate certain facts to the other party.

How Misrepresentation Is Different From Fraud

Fraud refers to a clear and obviously intentional misrepresentation of a fact while misrepresentation simply refers to a statement that was made in good faith but is false. Committing fraud is making a false statement that convinces another party to commit to a deal, while an innocent misrepresentation is a statement made by a party that believes it to be true.

The most important difference between misrepresentation and fraud is that the latter was done with the specific purpose of misinforming someone else, which is not the case for the former. The difference is very important in a court of law if action is taken against the misrepresenting party. A simple misrepresentation does entitle the aggrieved party to cancel the contract, however. Only fraud allows the party to sue for damages.

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