Misrepresentation Legal Definition:

A false and material statement which induces a party to enter into a contract.

Related Terms: Merchantable Quality , Equitable Fraud , Unconscionable

In Cheshire, Fifoot & Furmston's Law of Contract, the term is described as:

"A representation is a statement of fact made by one party to the contract (the representor) to the other (the representee) which, while not forming a term of the contract, is yet one of the reasons that induces the representee to enter into the contract. A misrepresentation is simply a representation that is untrue."
Halsbury's Laws of England has a whole book on Misrepresentation. It describes misrepresentation as follows:

 

"A misrepresentation is a positive statement of fact, which is made or adopted by a party to a contract and is untrue.

 

"It may be made fraudulently, carelessly or innocently.

misrepresentation"Where one person (the representor) makes a misrepresentation to another (the representee) which has the object and result of inducing the representee to enter into a contract ... with him, the representee may generally elect to regard the contract as rescinded.

"In these circumstances, he may invoke the aid of the Court, which may confirm by declaration his entitlement to so regard the contract, and grant him other relief as may flow directly from the fact of rescission, for example, the return of money paid or chattels delivered by him pursuant to the terms of the contract.

"Alternatively, he may set up his entitlement to regard the contract as rescinded by way of a defence in any proceedings brought against him in order to enforce its terms."

Almost since time immemorial, misrepresentation often lurks when goods are sold by assertive salesmen, always ready and prepared to trump their wares, and close the deal; innocent exaggeration or contractual misrepresentation?

 

Because of that constant pressure, and the inequities that have, from time to time, resulted, the common law and equity have been smitten with misrepresentation resulting in a complex set of rules to apply in any attempt to determine in each individual case, whether grounds for rescission exists or not.

One of the many detours of the law in this area is a class of contracts in which the courts will look more harshly upon any misrepresentation - merely because of the nature of the contract or the power-relationship between the parties to the contract to which, leaving the law even more remote to the non-lawyer, they have given a Latin name: uberrmae fidei.

Cheshire, Fifoot & Furmston's Law of Contract, in politically-correct terms, describes the present state of the law of misrepresentation in the context of contracts as an "amalgam of common law and equity".

Up to 1963, the law in some jurisdictions did not help out those who had been victims of what was called innocent misrepresentation, presumably writing it off as just a feature of salesmanship.

In an attempt to contain judicial activism, some jurisdictions have enacted statutes such as England's Misrepresentation Act of 1967 which has, at §1 and 2, codified the law (emphasis added):

"Where a person has entered into a contract after a misrepresentation has been made to him, and the misrepresentation has become a term of the contract; or the contract has been performed; or both, then, if otherwise he would be entitled to rescind the contract without alleging fraud, he shall be so entitled, subject to the provisions of this Act, notwithstanding the matters mentioned (above).

"Where a person has entered into a contract after a misrepresentation has been made to him by another party thereto and as a result thereof he has suffered loss, then, if the person making the misrepresentation would be liable to damages in respect thereof had the misrepresentation been made fraudulently, that person shall be so liable notwithstanding that the misrepresentation was not made fraudulently, unless he proves that he had reasonable ground to believe and did believe up to the time the contract was made the facts represented were true.

"Where a person has entered into a contract after a misrepresentation has been made to him otherwise than fraudulently, and he would be entitled, by reason of the misrepresentation, to rescind the contract, then, if it is claimed, in any proceedings arising out of the contract, that the contract ought to be or has been rescinded, the court or arbitrator may declare the contract subsisting and award damages in lieu of rescission, if of opinion that it would be equitable to do so, having regard to the nature of the misrepresentation and the loss that would be caused by it if the contract were upheld, as well as to the loss that rescission would cause to the other party.

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