What is Misrepresentation?
Misrepresentation can be defined as a false statement of a material fact. Regarding the signing of contracts, one party who is found guilty of misrepresentation can result in the contract being terminated.
There are many negative consequences that can arise from misrepresentation, such as failed contracts, financial losses, and disputes that land you in court. It can cause you stress, damage working relationships, and even damage your reputation.
Read the rest of this article to explore important aspects of misrepresentation, such as its different types, common misrepresentation damages, how to prevent misrepresentation, and how a lawyer can help you navigate misrepresentation.
What are the Types of Misrepresentation?
There are three main types of misrepresentation:
- Innocent misrepresentation. This is when a false statement is made by someone who didn’t know it was false at the time the contract was signed. For example, a homeowner tells a prospective buyer that the roof of the house was replaced three years ago because this is what a previous owner told them, even though it’s incorrect.
- Negligent misrepresentation. The person doesn’t verify if a statement is true before they sign a contract. For example, an employer says a job role is fully remote, but then the employee is expected to work in the office for a few days per week.
- Fraudulent misrepresentation. This is when a person makes a statement with the knowledge that it’s false. For example, a car dealer tells a prospective buyer that the vehicle has low mileage, even though they have fraudulently changed its odometer in order to make a sale.
What are Common Misrepresentation Damages?
There are many ways to remedy misrepresentation, once it’s been established. These include the following:
Rescission
This is when the innocent party learns of the misrepresentation and wishes to rescind the contract, so that the agreement between them and the other party ends.
Rescission usually comes into play when the false statement was a significant contributor in the parties signing the contract.
If the innocent party knew about the statement, they wouldn’t have entered into the contract.
Damages
Sometimes a false statement can result in the innocent party experiencing monetary losses. They will want to recover these.
Specific Performance
Specific performance is considered if the damages aren’t sufficient for the innocent party. Instead, the misrepresenting party is told to meet all their contractual duties that were agreed on.
Are False Statements Always Considered Misrepresentation?
It can be challenging to differentiate between false statements and misrepresentation. To keep it simple, a false statement is a statement that’s untrue, but it doesn’t necessarily mean that there is negligence, intent, or any legal consequence involved. The statement can be written or spoken.
By comparison, misrepresentation is a statement made to another party that can cause them harm and can cause them to enter into a contract that they wouldn’t have if they knew that the statement was false.
If someone expresses an opinion that turns out to be incorrect, or even a half-truth, these are not necessarily considered misrepresentation. Staying silent on a matter is also not usually viewed as misrepresentation. That said, if it is misleading, then it could be.
In some cases, someone who claims that the other party is guilty of misrepresentation because of a false statement might know about it but still pursue the contract. This can make the issue of misrepresentation much more challenging to prove.
How Can You Prevent Misrepresentation?
There are important clauses you can include in your contracts to help you avoid misrepresentation.
Non-reliance Statements
A non-reliance statement is when both parties agree that they haven’t relied on representations outside of the contract. It prevents them from stating that other facts were at play, which can help to restrict parties’ liability for misrepresentation.
Entire Agreement Clauses
These clauses state that the contract is the complete agreement between parties and is considered superior over any other agreement between them. This prevents statements made before the contract from resulting in misrepresentation claims.
Express Exclusion Clauses
This term is included in a contract to exclude liability for misrepresentation, whether in statements made before the contract or those during the contract. It is beneficial to prevent disputes by clearly defining both parties’ responsibilities.
Limitation of Available Remedies
This clause restricts the remedies that can be made available for a misrepresentation claim. By including it in a contract, it prevents excessive or unfair claims from being made by either party.
Do You Need a Lawyer for Misrepresentation?
You can benefit from hiring a lawyer to prevent, or help you navigate, misrepresentation. Here’s what they will do.
- A lawyer will draft and review misrepresentation clauses in contracts to protect your interests.
- They’ll assess your situation to see if your claim of misrepresentation is valid.
- They’ll help you gauge what type of misrepresentation you’re dealing with and how to resolve it. This will affect the remedies available.
- They’ll advise you on legal remedies, such as damages or rescission, based on your specific situation.
- They’ll gather evidence of misrepresentation, whether in the form of marketing materials, emails, or witness statements.
- They’ll protect you from making mistakes, such as by re-drafting vague contracts that put you at risk.
- They’ll resolve your misrepresentation outside of court, such as by representing you during mediation or arbitration.
- They’ll help you if there’s a claim of misrepresentation against you, such as by sending demand letters or responding to legal notices on your behalf.
- They’ll represent you in court if your dispute escalates. They’ll handle all aspects involved, such as filing paperwork and building strong arguments for you.
Where Can You Hire a Lawyer for Misrepresentation?
If you’re dealing with a case of misrepresentation, you should contact a lawyer on ContractsCounsel, an online legal marketplace that connects clients with experienced lawyers who have been vetted on the platform. They’ll assess your claim and help you pursue remedies for misrepresentation.
They can also review your contracts for misrepresentation clauses. All you have to do is post a project on the ContractsCounsel marketplace (it’s free). Lawyers on the platform will send you multiple bids and you’ll choose a lawyer to work with based on factors such as their client ratings, experience, and credentials.
