In contract law, a misrepresentation is a false statement of fact that induces someone to engage into a contract. The contract need not be in writing; a verbal agreement will suffice. An agent or employee may make the false statement on behalf of their principal or employer. A statement of opinion and a sales pitch are insufficient to constitute misrepresentation. There are three types of misrepresentation: negligent, innocent, or fraudulent. In this article, Breach Of Contract Misrepresentation, we take a look at the process and mechanism involved.
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What are the different types of breach of contract?
- Minor breach of contract – where a term(s) has been breached, but the breach is so inconsequential that the remainder of the contract can be performed (the injured party can sue for damages, but typically cannot terminate the contract).
- Material breach – where multiple breaches have occurred, or the breach reaches the core of the contract, rendering it impossible to perform.
- Anticipatory breach – where one party notifies the other of their inability to perform part or all of their contractual obligations. In this instance, the contract can be terminated and damages can be sought.
If a breach of contract is established, you must still provide evidence that the other party’s failure to perform caused you harm and that the harm was not too remote from the breach.
What is the remedy for misrepresentation?
The remedy for misrepresentation is contract cancellation and/or monetary compensation. To determine how to proceed, it must be determined whether the misrepresentation was fraudulent, negligent, or innocent.
The claimant may seek rescission and damages for fraudulent and negligent misrepresentation.
For innocent misrepresentation, the court has the discretion to award damages in lieu of rescission or rescission, but not both.
Fraudulent misrepresentation
As it is predicated on intentional deception, fraudulent misrepresentation is the most serious form of misrepresentation. The claimant must demonstrate that the untrue statement was made intentionally or recklessly, that they relied on it, and that it induced them to enter into the contract.
Due to the gravity of the allegation, the burden of proof is high. The allegation of fraud must have been plainly stated, and it must be demonstrated that the person making the statement knew it to be false, had no belief in its veracity, or was careless as to whether it was true or false. Additionally, it must be shown that the defendant intended for the plaintiff to rely on the representation. The court will generally presume that the claimant would not have entered into the contract if not for the fraud.
The claimant must also demonstrate that they endured loss and damage as a result of relying on the claim.
Proving a case of fraudulent misrepresentation is difficult and may require a substantial amount of evidence from the period preceding the formation of the contract, such as what each party knew, what was discussed or disclosed in marketing materials, emails, meetings, and correspondence, and what promises were made.
If the court discovers fraudulent misrepresentation, it can order contract cancellation and compensation for any losses incurred. The losses need not be reasonably foreseeable.
Negligent misrepresentation
Negligent misrepresentation can occur when a false statement is made recklessly or without reasonable grounds for believing it to be true. The claimant must demonstrate that the statement was false, while the party making the statement must demonstrate that they believed it and that their belief was reasonable when defending a claim.
If the court finds in favour of the plaintiff, it may order rescission of the contract or damages instead, as well as compensation for losses that were unforeseeable.
Innocent misrepresentation
Innocent misrepresentation occurs when a statement is made without error and the creator can demonstrate that he or she had reasonable grounds to believe it was true.
Due to the written agreement, the misrepresentation may also be a condition of the contract, in which case the claimant may choose to sue for breach of contract and damages in lieu of a misrepresentation claim.
Note that it can be challenging for the claimant to provide sufficient evidence to support a claim for fraudulent and negligent misrepresentation. In some instances, it may be easier to provide evidence of contract breach.
When a claim for breach of contract is successful, damages are determined by placing the claimant in the position they would have been in had the breach not occurred. In these instances, claimants may seek compensation for contract-related losses, contract-related expenses, and loss of bargain (the inability to complete a sale or other business transaction).
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How to contact our Commercial Litigation solicitors
It is important for you to be well informed about the issues and possible implications of a breach of contract and misrepresentation. Expert legal support is crucial in terms of ensuring a positive outcome to your agreement.
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Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
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