A misrepresentation is an untrue statement of a material fact made by one party which affects the other party’s decision in corresponding to a contract. If the misrepresentation is identified, the contract can be declared void, and depending on the situation, the unfavorably impacted party may seek damages. In such a contract dispute, the party who made the misrepresentation becomes the defendant and the aggrieved party is the plaintiff. Misrepresentation in contract law is especially important in business dealings where huge transactions occur with high frequency. Misrepresentations of the value and/or risk correlated with an agreement can cause enormous financial losses to businesses and individuals while increasing the risk of collaborative business ventures. Accordingly, misrepresentation contract law is vital to ensuring fairness and diminishing the risk of entering into agreements between individuals and businesses.
Concept of Misrepresentation
For understanding the concept of misrepresentation first, we need to know the meaning of representation in terms of the contract. A representation is said to be such a statement that generates the entry into a contract but is not a part of a term of the contract.
Misrepresentation is about the giving of inaccurate information by one party (or their agent) to the other before the contract is made which induces them to make the contract. If a person makes a contract in reliance on misrepresentation and has to face loss as a result, they can revoke the contract or claim damages.
A statement made without any reasonable basis is an unwarranted statement. When a person makes a positive statement of a fact without any trustworthy source of information and believes that statement to be true, the act amounts to misrepresentation. When something is unwarranted it is not called for under the provided circumstances. For instance, arguing the merits of someone’s talent is one thing, but addressing them stupid is unwarranted.
Breach of duty
Once a duty has been established about the defendant we must find that the defendant has breached the duty. A breach of the duty of care occurs when one fails to achieve his or her duty of care to act wisely in some aspect. Commonly, if a party does not act reasonably to prevent foreseeable injuries to others, the duty of care is breached. Breach of duty is defined in a very interesting case named Vaughn V Menlove which states that the defendant is found to have overdue of the claimant and if he acts below the reasonable standard then a breach of duty would have been committed
- they may find out the cause of the breach and try to remedy it;
- they may dispute that a breach has occurred;
- they may argue that there is an exclusion clause or other terms in the contract limiting their liability for the breach; or
- they might argue that there is a cause for their breach, or that the contract is invalid.
Inducing mistakes about subject matters
Inducing mistake about subject matter involves mistakes of fact. This happens when both the parties misunderstood each other leaving them at a crossroads. Such a wrongful act or a mistake can be because of an error in understanding, or ignorance or omission, etc. But a mistake is never intentional, it is an innocent commanding.