Definition
Misrepresentation is an untrue statement made by one party to another, which induces the other party to enter into a contract or transaction. Misrepresentation can be either intentional (fraudulent), negligent, or innocent. It often relates to the nondisclosure of any fact that should be disclosed according to law or involves the planned creation of a false appearance to mislead the other party. Misrepresentation may constitute grounds for legal action, where the injured party may sue for damages or rescind the contract.
Examples
Example 1:
A car dealer tells a customer that a used car has only 30,000 miles on it, but in reality, it has 130,000 miles. If the customer buys the vehicle based on this information, they may sue for misrepresentation upon discovering the true mileage.
Example 2:
A seller of a house claims that the property has never had issues with its foundation. Later, the buyer discovers severe foundation problems that were known but not disclosed by the seller. In this case, the buyer could claim misrepresentation and seek damages.
Frequently Asked Questions
What are the types of misrepresentation?
There are three main types of misrepresentation:
- Fraudulent Misrepresentation: Knowingly making a false statement.
- Negligent Misrepresentation: Making a statement carelessly or without reasonable grounds for believing its truth.
- Innocent Misrepresentation: Making a statement that one believes to be true but is actually false.
What is the legal remedy for misrepresentation?
The legal remedies for misrepresentation include:
- Rescission of the Contract: Returning both parties to their pre-contractual positions.
- Damages: Monetary compensation for the losses suffered due to misrepresentation.
Can a misrepresentation be a form of fraud?
Yes, fraudulent misrepresentation is considered a form of fraud where the false statement is made knowingly, without belief in its truth, or recklessly without caring if it is true or false.
Related Terms
Material Fact:
A fact that, if known, would influence a party’s decision to enter into a contract or the terms of the contract. Misrepresenting a material fact can lead to legal action for misrepresentation.
False Advertising:
Advertising that misleads consumers, either by making false claims or by omitting important information. False advertising is closely related to fraudulent misrepresentation.
Fraud:
A deliberate deception to secure an unfair or unlawful gain. Fraudulent misrepresentation is a subset of fraud where the false statement is made to induce a party into a contract.
Online References to Online Resources
- Investopedia on Misrepresentation
- Wikipedia on Misrepresentation
- Legal Information Institute on Misrepresentation
- FindLaw on the Elements of Misrepresentation
Suggested Books for Further Studies
- “Contract Law: Text, Cases, and Materials” by Ewan McKendrick
- “Principles of Contract Law” by Robert A. Hillman
- “The Law of Contract” by Janet O’Sullivan and Jonathan Hilliard
- “Cases and Materials on Contracts” by John D. Calamari and Joseph M. Perillo
- “Contract Law in the USA” by Gregory M. Class
Fundamentals of Misrepresentation: Business Law Basics Quiz
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