Unfortunate as it may be, there are vendors, suppliers, and other third parties that misrepresent their products and services, claiming more than they can deliver or failing to perform substantially according to their claims.
False claims are also referred to as misrepresentation. In the business world, promises are disguised as contracts, but they are nevertheless promises. When a party to a contract fails to substantially perform according to that contract, it is said to be in breach of contract.
A misrepresentation claim arises when one party to a contract (the representor) made a false statement of fact that induced the other party (the representee) to enter into the contract. Common law and the Misrepresentation Act of 1967 (MA 1967) govern claims for misrepresentation. In this article, Can You Sue A Company For Misrepresentation, we take a look at the process involved and the options available to you.
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What is misrepresentation?
Typically, when entering into a business contract, several statements delineating the context and particulars of the transaction are made. If someone enters into a contract based on a false statement, this is considered misrepresentation. It isn’t necessary that the deceptive statement be contained in a formal written document; it can be information provided in a conversation, meeting, or sales proposal.
If misrepresentation is proved, the court may nullify the contract and award damages if a loss has occurred.
There are primarily three categories of misrepresentation:
- Negligent misrepresentation
- Fraudulent misrepresentation
- Innocent misrepresentation
Negligent misrepresentation
When a claimant relies on a negligent statement and sustains a loss as a result, this constitutes negligent misrepresentation.
When a statement is made negligently or in the absence of reasonable grounds for believing it to be true, negligence has occurred.
To defend against a claim of negligent misrepresentation, if the statement can be shown to be false, the party that made it must demonstrate that they had a reasonable belief that it was accurate.
The Misrepresentation Act of 1967 permits the payment of damages in lieu of contract cancellation in the event that negligent misrepresentation is proven. Damages for misrepresentation may also be awarded for the resulting loss. Again, the loss is not required to be reasonably anticipated.
Fraudulent misrepresentation
Fraudulent misrepresentation is based on deceit, where a false representation has been made which has induced someone to engage into a contract. It is applicable when a deceptive statement is made:
- Knowingly;
- Without having faith in its veracity; or
- Recklessly or casually regarding whether it is true or false.
The courts consider this type of misrepresentation seriously and will look for evidence of the following:
- A misleading statement was made to the claimant;
- The defendant either knew that the statement was false or was negligent as to whether or not it was accurate;
- The claimant was intended to rely on the false statement;
- The claimant sustained a loss as a result of relying on the representation.
The claimant must demonstrate that the defendant possessed the requisite state of mind, i.e., that he or she knew the statement to be false or was oblivious to its truth or falsity, which is typically demonstrated by inference. When serious misconduct is alleged, the court may be more likely to infer the required state of mind.
Additionally, it must be demonstrated that the claimant would not have entered into the contract had the misrepresentation not been made. Before rendering a verdict, the court will inquire, “If not for the misrepresentation, could the claimant have acted differently?”
If fraudulent misrepresentation is proven, the court can order the contract to be rescinded as well as compensation for any losses caused by the misrepresentation. There is no requirement that the loss be reasonably foreseeable.
Innocent misrepresentation
A person is guilty of innocent misrepresentation when they make a deceptive statement while sincerely believing it to be true, and that false statement induces another party to enter into a contract.
If the case is proved, the court may order rescission of the contract as a remedy; however, rescission is the court’s preferred remedy.
Does silence count as misrepresentation?
Under particular conditions, silence can constitute misrepresentation. For instance:
If only half the story is told, misrepresentation can occur due to what was left unsaid, such as being “economical with the truth”, or a true statement can become false prior to the contract being signed, such as a statement that a house has never been flooded being accurate at the time of initial discussions but inaccurate at a later stage (and not being corrected).
If the contract is one of “good faith” and material facts were not disclosed at the outset, for instance in the case of an insurance contract, the insurer would not be required to pay out on a claim.
Can you sue a company for misrepresentation?
Frequently, the answer is “yes”.
Business professionals who are regarded as experts in their field are obligated to provide superior services to their clients. Therefore, a professional can be sued for misrepresentation when they provide deceptive statements, false promises, or incorrect information that results in personal injury or other damages.
The remedies for misrepresentation include:
- Rescission – if misrepresentation is determined to have occurred, the court can “rescind” the contract, restoring both parties to their position prior to the signing of the agreement.
- Affirmation, or the continuance of the agreement. Beware of “affirming without intending to,” such as delaying a complaint about the misrepresentation for an extended period of time.
- Damages in lieu of rescission are intended to place the person claiming misrepresentation in the position they would have occupied if the misrepresentation had not been made.
- Contract damages – if the statement is determined to have been a term of the contract, the party alleging misrepresentation may also be entitled to claim damages for the loss incurred by what is essentially a breach of contract.
How we can help
We have a proven track record of helping clients deal with the process involved in misrepresentation claims. We will guide you diligently and ensure all checks are carried out swiftly and efficiently. We firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting. You can read more about the range of corporate services we offer by clicking here: https://blackstonesolicitorsltd.co.uk/corporate-legal-services/
How to contact our Corporate solicitors
It is important for you to be well informed about the issues and possible implications of a misrepresentation claim. However, expert legal support is crucial in terms of ensuring a positive outcome to your case.
To speak to our Corporate solicitors today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
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