Misrepresentation

In common law jurisdictions, a misrepresentation is a false or misleading statement of fact made during negotiations by one party to another, the statement then inducing that other party to enter into a contract. The misled party may normally rescind the contract, and sometimes may be awarded damages as well (or instead of rescission).

The law of misrepresentation is an amalgam of contract and tort; and its sources are common law, equity and statute. In England and Wales, the common law was amended by the Misrepresentation Act 1967. The general principle of misrepresentation has been adopted by the United States and other former British colonies, e.g. India.

A "representation" is a pre-contractual statement made during negotiations. If a representation has been incorporated into the contract as a term, then the normal remedies for breach of contract apply. Factors that determine whether or not a representation has become a term include:

Otherwise, an action may lie in misrepresentation, and perhaps in the torts of negligence and deceit also. Although a suit for breach of contract is relatively straightforward, there are advantages in bringing a parallel suit in misrepresentation, because whereas repudiation is available only for breach of condition, rescission is prima facie available for all misrepresentations, subject to the provisions of s.2 of the Misrepresentation Act 1967, and subject to the inherent limitations of an equitable remedy.

For a misrepresentation to occur, especially a negligent misrepresentation, the following elements need to be satisfied.

There is no general duty of disclosure in English contract law, and one is normally not obliged to say anything. Ordinary contracts do not require "good faith" as such, and mere compliance with the law is sufficient. However in particular relationships silence may form the basis of an actionable misrepresentation:

To amount to a misrepresentation, the statement must be untrue or seriously misleading. A statement that is "technically true" but that gives a misleading impression is deemed an "untrue statement". If a misstatement is made and later the representor finds that it is false, it becomes fraudulent unless the representer updates the other party. If the statement is true at the time, but becomes untrue due to a change in circumstances, the representor must update the original statement. Actionable misrepresentations must be misstatements of fact or law: misstatements of opinion or intention are not deemed statements of fact; but if one party appears to have specialist knowledge of the topic, his "opinions" may be considered actionable misstatements of fact. For example, false statements made by a seller regarding the quality or nature of the property that the seller has may constitute misrepresentation.

Statements of opinion are usually insufficient to amount to a misrepresentation as it would be unreasonable to treat personal opinions as "facts", as in Bisset v Wilkinson.