Misrepresentations
Contract Law

Misrepresentations may be classified as fraudulent, negligent or innocent. Misrepresentations are essentially false statements. They are sometimes referred to as misstatements.

Fraudulent Misrepresentation

A fraudulent misrepresentation is a statement of fact made without belief in its truth either recklessly, knowingly or without caring whether it is true or false with the intention that it should be acted on and it is in fact acted upon. Male fides are not a prerequisite for a fraudulent misrepresentation to be proved. Where a contract has been entered into by reason of fraudulent misrepresentation, the person induced may rescind the contract, claim damages or both. The Misrepresentation Act 1967 allows a claimant to base their claim on negligence or on the fraud. Furthermore, when a misrepresentation claim is based in negligence, the Act allows creates a reverse onus on the defendant to disprove negligence - that is, that they had a reasonable ground to believe and they did believe that the facts represented were true.

Negligent Misrepresentation

A negligent misrepresentations may be caught by the common law or under the Misrepresentation Act 1967. Financial loss may be recovered where special relationship exists, which is a noteworthy difference with the Tort of Negligence. Innocent misrepresentations are made where the maker of the statement has reasonable grounds for believing in its truth, and a negligent misrepresentation cannot be fraudulent, provided they had an honest belief in the truth of the statement made.

Fraudulent and negligent misrepresentations entitle a claimant to an award of damages or rescission. Rescission is only available as a remedy for misrepresentation where:

1. the contract has not been affirmed;
2. restitution is not impossible, and
3. a bona fide purchaser for value without notice has acquired an interest.