Misrepresentation is taken from the word “representation.” A representation in law is a statement of fact. Misrepresentation, on the other hand, is a false statement of fact.
To trigger a legal claim, misrepresentation demands that the representation be substantial, actively relied upon, and pivotal in determining the transaction—a trio of critical elements constituting the grounds for misrepresentation.
Elements of misrepresentation
A representation must be made
As stated above, a representation is a statement of fact. A “statement” could be a gesture, silent, or an action, as long as it conveys a message of fact.
A statement of opinion isn’t a representation. For instance, “You will love this investment” isn’t a statement of fact. It is a statement of opinion and not a representation.
However, a statement of opinion may be held to be a false representation when the maker of such representation can be said to have enough knowledge to make an opinion that can be relied upon on that subject matter, and the maker knows the opinion to be false.
The key here is that the statement must be material enough to make the claimant rely on it and enter into an agreement or take action.
The representation was false
For misrepresentation to be actionable, the statement of fact has to be false.
For instance, if a person who is not the Managing Director of a company represents himself or herself as such to make another person enter into an agreement with him, that’s a misrepresentation.
Non-disclosure of your role may also qualify, leading to a situation where a party, trusting your apparent significance, enters an agreement unknowingly.
There was Reliance
Where the claimant didn’t rely on the representation, he has suffered no hurt, thus, he cannot sue for misrepresentation. Misrepresentation typically arises from contractual obligations. Thus, where a party detects misrepresentation and refrains from entering or furthering the agreement, he cannot sue for misrepresentation.
The remedy for misrepresentation is usually damages. Damages can only be paid where there was a hurt. Where there’s none, there’s no cause of action.
Types of Misrepresentation
Innocent Misrepresentation
When someone honestly believes a false statement they make, it’s an innocent misrepresentation. Think of a salesperson relaying inaccurate product specs they received from the manufacturer. While still misleading, the contract isn’t necessarily void, but you might be entitled to compensation for the inconvenience.
Negligent Misrepresentation
If someone in a position of authority, like a lawyer or doctor, carelessly makes a false statement you rely on, they can be held liable for negligent misrepresentation. Imagine a doctor misdiagnosing you, leading to unnecessary treatment.
Fraudulent Misrepresentation
This is where a person knowingly makes a false statement of fact, material enough to make another act on it. This is the most common type of representation, and the court can award general and specific damages in addition to rescinding the contract. Fraudulent misrepresentation is one of the elements of fraud.
Conclusion
In all misrepresentation types, the plaintiff must prove reliance on the misrepresentation when entering a contract. If reliance is not proven, the case may not stand. Additionally, the misrepresentation must result in a tangible loss, broadly interpreted to include opportunity costs, loss of access to money, or loss of time.
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