What Is Misrepresentation? A Plain-English Guide

If someone gives you false information before a contract is made and it influences your decision to agree, misrepresentation may be relevant.

This explanation covers England and Wales.

Lowdown

Misrepresentation generally means a false statement made before a contract is entered into that causes the other party to enter into it.^[1]

Why It Matters

Misrepresentation is commonly described as fraudulent, negligent or innocent. Fraudulent misrepresentation involves dishonesty. Under section 2(1) of the Misrepresentation Act 1967, a party who makes a false statement that causes the other party to enter a contract and suffer loss may be liable for damages unless they can show they believed it was true and had reasonable grounds for that belief.^[2]

Possible remedies include rescission, which means setting the contract aside, and damages in certain cases. A court or arbitrator can sometimes award damages instead of rescission.^[2]

Not every inaccurate statement qualifies. The statement must have influenced the decision to enter the contract. Statements of opinion or prediction may require closer examination.^[1]

A contract clause that tries to exclude or limit liability for misrepresentation is not automatically effective. Legal rules restrict when such clauses can be relied upon.^[3]

Our Conclusion

If false pre-contract information influenced your decision to sign, you may have remedies. The facts, the type of statement and the contract wording all matter.

Sources

[1] Business Companion, Selling and supplying goods: Misrepresentation

[2] Misrepresentation Act 1967, section 2: Damages for misrepresentation and section 1: Rescission

[3] Misrepresentation Act 1967, section 3: Avoidance of provision excluding liability for misrepresentation