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Before almost all contracts are finalised and formally signed, either or both parties will generally make pre-contract statements or representations which are an important part of the marketing, negotiation and pre-contract assurance stage. If such representations are incorrect this may amount, legally, to misrepresentation.
The law of misrepresentation and the legal consequences and options for the wronged party are complex (see below).
Our experienced team of litigation specialists can advise and assist you whether you are considering claiming misrepresentation or defending allegations of misrepresentation. Please do get in contact and we will help you assess your legal position and options.
In order to satisfy the legal tests and successfully claim misrepresentation there are some key elements which must be satisfied, which are :-
Incorrect factual representation - before the contract was entered into a factual representation was made which was incorrect. The representation must be factual, not just a sales pitch based on opinion. The representation does not necessarily have to have been made by the other party to the contract. For example, a misrepresentation by an estate agent retained by a property seller can result in a misrepresentation claim by the property buyer against the property seller - read more on property misrepresentations here.
There must be reliance – to succeed in legally proving a misrepresentation claim, you would need to satisfy the court that if you had known the truth about the representation you would not have entered into the contract
There must be loss caused by the misrepresentation - having entered into the contract you have suffered financial loss.
There is no requirement for the misrepresentation of fact to be in writing, it can be verbal, and may even be implied in some situations, although a claim based on verbal or implied misrepresentation is inherently more risky.
The legal remedies and consequences associated with misrepresentation depend on whether the representation was made innocently, due to negligence or whether there was fraudulent intent.
The significance of whether the person(s) making the misrepresentation did so deliberately or not is that this can impact on the legal options available to the wronged party. The types of misrepresentation and consequences are :-
Innocent misrepresentation
Negligent misrepresentation - effectively happens where the person stating the fact(s) has the ability to check and ensure accuracy but instead carelessly and generally without grounds for believing the statement is correct, makes the statement. Legal remedies for negligent misrepresentation are either a claim for damages or the option to potentially cancel the contract (rescission of the contract in legal terminology)
Fraudulent misrepresentation – based on deliberate intention to deceive. Whilst fraud is serious and with some types of fraud give rise to criminal liability, the implications of being able to prove fraudulent misrepresentation only really practically apply as a civil law issue with misrepresentation. However, proving fraudulent misrepresentation can advantage a claimant in that it will be much easier to prove reliance and inducement to enter into the contract. The legal options and remedies will still generally be to claim damages or rescind the agreement.
As with claiming damages under English law generally, proving loss based on a misrepresentation is rarely straightforward. The claimant must prove that any losses claimed were caused by the misrepresentation and are they types of losses that might be foreseeable based on the misrepresentation and subsequent contractual relationship.
If losses are difficult to prove or not substantial you will need to balance all the risks before deciding whether to instruct lawyers and potentially start a claim. It is important to remember that, however unfair it may seem, there are a number of elements, such as proving that you would not have entered into the contract but for the misrepresentation, where the legal onus will be on you.
We are a nationwide firm with specialist lawyers to advise on misrepresentation, whether you want advice on whether you have a claim for misrepresentation and the available option or remedies, or whether you are a potential defendant. Please do get in contact.
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