In simple terms, misrepresentation is a statement about something that is not true. In a business context, it means that one party entered into a contract based on false, inaccurate or misleading information. That party then has grounds to file a lawsuit.
Not all misrepresentation is intentional, but regardless of intent, there are consequences for making inaccurate statements when entering into a contract.
Deliberate Misrepresentation
Also known as “fraudulent misrepresentation,” this is the most serious type; depending on the circumstances, it can cross the line from tort to criminal liability. This is when the first party purposely makes inaccurate statements in order to get the second party to sign the contract. In addition to rendering the contract null and void, deliberate misrepresentation is also grounds for a lawsuit.
Negligence
In a case of negligent misrepresentation, the first party makes claims but fails to do their homework. It might not have been a deliberate lie, but rather a statement presented as fact that was not confirmed and turns out to be inaccurate.
Accidental
Sometimes, the first party makes a statement in good faith that later turns out to be inaccurate. In a case of innocent misrepresentation, the second party may have a cause of action to sue for damages, but only if they suffered demonstratable losses because of the inaccuracy.
