Types of misrepresentation include innocent and fraudulent. An agreement depends on the goodwill and honesty of those who have entered into the contract. If parties to an agreement misrepresent the facts without suffering consequences, few people would bind themselves to agreements of any kind. Misrepresentation is a vital concept of contract laws in many nations.

The definition of misrepresentation is a false statement that coerces another party to enter in to an agreement. Moreover, to pursue claims against individuals who made the misrepresentation, the plaintiff must demonstrate that he or she primarily relied on the false information upon deciding to proceed with a business transaction. Also, the plaintiff must show that he or she was damaged in some capacity if that person wishes to pursue damages of any kind.

  • Note: An opinion, even if rendered false, is not the same as fact and usually does not factor in cases involving misrepresentation.

Claims stemming from allegations of misrepresentation will ensure that agreements are honored, and that negligent or unscrupulous behavior will not go without consequences. Certain statements may be made during the course of business that are not included into a contract. For instance, a salesman that inflates the virtues of a product could be construed as misrepresentation. However, an opinion does not constitute misrepresentation, unless such a statement is made without a reasonable belief in the truth.

Definitions to Know

Take note of the following definitions:

  • Representation: This is a statement meant to entice another party to enter into an agreement.
  • Misrepresentation: This comprises a false statement by an offending party to the other that lures the opposite party to agree to a contract, resulting in a loss for that party.

Misrepresentation Occurrences

Under certain cases, false promises or claims made by sellers regarding the nature or quality of a product constitutes misrepresentations as well. When a statement gets confirmed as a representation, you must demonstrate that it was stated to another party who used that information to proceed with a business transaction. The statement should be an inducement, and does not have to be the only factor. However, the party should be influenced by the statement in the same fashion, with the exception of cases involving outright fraud.

If a claimant has a chance to find out the truth, this would not stop the statement from qualifying as a misrepresentation. With that, the misrepresentation case may be dismissed if one can demonstrate that the representation was vitally correct instead of 100% correct.

Fraudulent Misrepresentation

Fraudulent misrepresentation is a serious offence. Such fraud, including being the foundation in which an agreement would be revoked, is enough to settle in a court of law. However, the burden of proof goes to the claimant. Fraudulent misrepresentation is the false claim that’s made without belief in truth. This form of fraud happens when a party to an agreement willingly makes untrue statements that convinces another person to take part in a contract.

Fraudulent misrepresentation also happens when a party either does not believe in the statement, or is outright reckless regarding the truth. Claimants who have been victims of supposed fraudulent statements may claim rescission, where a judge will revoke a contract entirely, and will award damages if necessary.

  • Example: A professional offers services to another. The professional willingly overly inflates his/her expertise to secure a new client.

If fraudulent misrepresentation is used to get contracts signed, that agreement could be voided in its entirety when such fraud is revealed. All parties should take reasonable measures to ensure that an opposite party is telling the truth, otherwise they could fall prey to fraudulent claims and lose money in the process.

Negligent Misrepresentation

Negligent misrepresentation occurs in cases where one party states a careless claim, or does not have enough reason to believe that a statement is true. In the same manner as fraudulent misrepresentation, a claimant can go after rescission and damages. In such a case, the burden of proof falls on the claimant. The representation is created via a third party who is not privy to the agreement. Moreover, the party that makes the negligent statement does not know that the claim is false, and he or she does not intend to outright deceive another party. However, they also have no foundation with which to believe a statement is in fact true.

For more information on types of misrepresentation, submit your legal inquiry to our UpCounsel marketplace. UpCounsel’s attorneys will offer more insight into misrepresentation, and what you need to do if you are the victim of fraud of any kind. Moreover, they will provide legal representation if you need to defend your rights and losses in a court of law.