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What To Do If You Are A Victim Of Misrepresentation

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It is common knowledge that a lot of personnel in sales have targets that they are required to hit in order to be appropriately remunerated. Whether this is at a car garage or in your home or place of business, I’m sure you’ve all been party to it. But does this give them the right to say what you want to hear to get you to sign with them…even if it’s not true?

Misrepresentation is something which all consumers, individual or businesses, must be wary of when agreeing to enter into a contract for the provision of services with a third party. At the outset, it is important to understand exactly what it is you are agreeing to, and what the services or goods are that will be provided in return for you signing the contract.

To Begin With,What Is A Misrepresentation?

The first thing to consider is whether during the negotiations leading to the contract being formed, a representation was made; something which may have induced you into entering into the contract. If such a statement was an untrue statement of fact or law, and you subsequently suffered loss, this is a misrepresentation. It may seem trivial, but establishing misrepresentation is only possible on the basis that the comments made were not merely a person’s opinion.

Following this, you have to be able to prove that you would not have entered into the agreement but for the statement(s) initially made by the representing party, in other words, it was a large contributing factor. A claim of misrepresentation will not be viable if you were inclined to enter into the agreement regardless of this particular statement.

Finally, you must show that the representing party had the intention of enticing you into the agreement when making the representation, which will be likely if the representations were made during the course of the negotiation.

Are There Different Forms Of Misrepresentation?

Once a misrepresentation has been established, it is necessary to identify what type of misrepresentation was made, as this dictates the remedies that are available to you. There are three types of misrepresentation:

Fraudulent misrepresentation – whereby a contracting party knowingly, or without belief in its truth, makes a false representation;

Negligent misrepresentation – where one contracting party carelessly, or without reasonable ground for believing it’s truth, makes a statement to another;

Innocent misrepresentation – this is where the contracting party who makes the misrepresentation, did so with reasonable grounds to believe its statement was in fact true

What Is My Position If I Am The Victim Of Misrepresentation?

Once misrepresentation is proven, there are two possible remedies available to you:

The first is rescission, which is the act of bringing the contract to an end, and reinstating all parties to the contract to the position they were in before the contract was made.

The second is the award of damages. Most commonly, the level of damages awarded is judged based on what is required to put the suffering party into the position it would have been had it not entered into the contract.

Is There Anything Else To Be Aware Of?

If you are acting on behalf of a business, it is imperative you are aware of ‘entire agreement’ clauses. These are contractual clauses which prevent statements or representations that are not explicitly contained in a written agreement, from having contractual force. These can, therefore, be used to reduce liability for misrepresentation claims.

Such clauses can come in multiple forms:

  1. A non-reliance statement – this can be something as simple as “X agrees with Y that he is not entering into the contract as a result of any representation made to him by Y”. The key here is that it is written proof that you as the business was not induced into the agreement as the result of a false representation made by the supplier.
  2. An express exclusion of liability – these are clauses made specifically to exclude misrepresentations in respect of pre-contractual statements, so those made during negotiation, or in respect of statements set out in the agreement.
  3. A restriction of remedies – the final type is a clause that will not wholly exclude liability on behalf of the representing party, but will limit the level of remedy available for misrepresentation.

If you are a consumer or business seeking to obtain goods or services to benefit you then it is wise to take the time to firmly establish what it is that you will be contracting into. It is a lot easier to say “no” during negotiation, than to say “no” once the contract is signed. 

If you think you are stuck in a contract as a result of a misrepresentation, our Commercial Disputes Team can provide you with practical advice to help you. Speak to a member of our team today.