Misrepresentation and misappropriation claims

A misrepresentation is an untrue statement made by one party which induces another party to enter into a contract, which later causes the second party to suffer a loss. There are therefore essentially three elements to a misrepresentation: an untruth, inducement, and loss. Misrepresentation can also occur if the statement is made by the agent of a party to the contract if that agent is acting within the scope of their authority, or by a third party who is not an agent but the party to the contract is aware that the misrepresentation has been made.

Whilst the misrepresentation can be a term of the contract, it does not have to be. Often, misrepresentations occur during the pre-contract negotiations. The key is that to amount to a misrepresentation, any statement must be one of fact or law and not “mere sales puffs” or opinion.

There are three types of misrepresentation, as follows:

1. Fraudulent misrepresentation. This occurs where a false representation has been made knowingly, or without belief in its truth, or recklessly as to its truth.
2. Negligent misrepresentation. This occurs where a statement is made by one party without reasonable grounds for believing its truth.
3. Innocent misrepresentation. This occurs where the party who made the misrepresentation can prove that it had reasonable grounds to believe that the statement was true.

There are various remedies for misrepresentation, the most common of which are as follows:

1. Recission. This means that a contract is completely reversed and the parties continue as if there had been no contract whatsoever, both parties returning to the position that they were in before the contract was ever entered into.
2. Damages. Damages can be awarded, and are generally done so for the purpose of placing the parties in the position they would have been had the misrepresentation not been made. It is for the Claimant to bear the burden of proof on the balance of probabilities, and you must show the causation of the loss and the remoteness of the loss. The level of damages available depends on the type of misrepresentation.

If you are looking for advice regarding a potential claim for misrepresentation, please contact us on 0203 440 8000 and ask to speak to a member of our dispute resolution team.