What is misrepresentation in contract law?
Misrepresentation happens when false or misleading information is given during a contract negotiation, causing someone to sign a contract based on incorrect facts. If this happens and leads to financial loss, the misled party may have the right to cancel the contract or claim compensation.
Misrepresentation can occur in many situations, including business agreements, property deals, consumer contracts, and financial transactions. Whether the false statement was intentional or accidental, it can still have serious legal consequences.
What are the three types of misrepresentation in contract law?
There are three main types of misrepresentation in contract law, each with different legal consequences:
1. Fraudulent misrepresentation
This is the most serious type of misrepresentation. It occurs when a person knowingly makes a false statement or is reckless about whether their statement is true. To prove fraudulent misrepresentation, the affected party must show:
The false statement was made intentionally to deceive.
They relied on this false information when signing the contract.
They suffered financial loss as a result.
💡 What can you do? If you’re a victim of fraudulent misrepresentation, you have the right to cancel the contract and sue for damages, including compensation for financial losses caused by the deception.
2. Negligent misrepresentation
Negligent misrepresentation happens when someone makes a false statement without taking reasonable care to check if it's true. This type of misrepresentation isn’t deliberate but still causes financial harm. It typically applies when the misrepresenting party had a duty of care to ensure the accuracy of their statement.
💡 What can you do? If you’ve been misled due to negligence, you can cancel the contract and seek damages to recover any financial losses you suffered.
3. Innocent misrepresentation
This occurs when someone makes a false statement without knowing it was false and without negligence. The person genuinely believed they were providing correct information, but it later turned out to be untrue.
💡 What can you do? In cases of innocent misrepresentation, you can usually cancel the contract (rescission), but you may not be entitled to financial compensation unless the court decides it’s fair to award damages instead.
When can misrepresentation happen?
Misrepresentation can happen in any contractual relationship where one party relies on the statements of another before signing a contract. Some common examples include:
Buying or selling property: If a seller falsely claims there are no structural issues with a property.
Business contracts: If a company misrepresents its financial position during negotiations.
Consumer transactions: If a retailer provides false information about a product's capabilities.
Employment contracts: If an employer misrepresents job responsibilities or company benefits.
If you suspect misrepresentation in a contract, a dedicated commercial law solicitor can help assess whether you have a legal case.
Does silence count as misrepresentation?
In most cases, silence alone does not count as misrepresentation in contract law. However, there are important exceptions where failing to disclose information can be legally problematic. Here’s when silence can amount to misrepresentation:
1. Failing to disclose crucial facts
If one party knows information that would significantly affect the contract but chooses not to share it, this can sometimes be considered misrepresentation.
💡 Example: A seller of commercial property knows that the building has major structural issues but does not disclose this to the buyer. If the buyer later discovers these defects, they may have grounds for a claim, arguing that the seller’s silence misled them into signing the contract.
2. When a statement becomes false over time
If a party makes a true statement initially but later learns it is false - and does nothing to correct it - this can amount to misrepresentation.
💡 Example: A company negotiates a business sale, telling the buyer that its revenue is growing steadily. However, before the deal is finalised, the company loses a key client, causing a sharp drop in revenue. If the seller fails to update the buyer about this change, they could be liable for misrepresentation.
In certain relationships where trust and transparency are required, such as between financial advisors and clients, remaining silent can be considered misrepresentation.
💡 Example: A financial advisor recommends an investment to a client but fails to mention that they will receive a large commission for selling it. If the client later suffers financial losses and learns about the advisor’s undisclosed financial interest, they could argue that the advisor had a duty to disclose this conflict of interest.
What makes a misrepresentation claim actionable?
If you believe you were misled into signing a contract, you may be able to make a misrepresentation claim. However, not all misleading statements count as misrepresentation by law. To bring a successful claim, you must prove the following four key elements:
A false statement was made – The information given was untrue or misleading.
The statement was factual – Opinions or future predictions do not usually count unless they are deliberately misleading.
The misrepresentation influenced the contract – The false statement caused you to enter into the contract.
You suffered a loss – There must be financial or other damage resulting from the misrepresentation.
If these elements are present, you may have a strong legal claim. You could have the right to cancel the contract or claim compensation for your losses.
How to prove a loss in a misrepresentation claim
Proving misrepresentation can be complex, as the burden of proof falls on the claimant. You must show that the other party made a false statement that led you to enter a contract. To succeed in a misrepresentation claim, you must provide strong evidence to support your case. This can include contracts, emails, letters, witness statements, and expert opinions. For example:
Bank statements and invoices: Showing losses caused by the misrepresentation.
Property valuations: If a misrepresentation affected the value of a property or investment.
Email and contract evidence: To demonstrate how the false statement influenced your decision.
Expert reports: If technical evidence is required, such as in business fraud cases.
What are the remedies for misrepresentation?
If misrepresentation is proven, you may be entitled to a range of remedies. The four main legal remedies are:
Rescission: The court may rescind the contract, meaning both parties are returned to their original positions as if the contract had never existed.
Affirmation: If the misled party continues with the contract without objecting in a timely manner, they may be seen as accepting the misrepresentation, preventing them from later seeking rescission.
Damages in lieu of rescission: Instead of cancelling the contract, the court may award compensation to put the claimant in the position they would have been in if the misrepresentation had not occurred.
Contract damages: If the false statement was part of the contract terms, the misled party may claim damages for breach of contract, compensating for losses caused by the misrepresentation.
Can a business exclude or limit liability for misrepresentation?
Many contracts include clauses which attempt to limit liability for misrepresentation. Although businesses can attempt to limit liability for misrepresentation, there are legal restrictions on doing so.
Under the Misrepresentation Act 1967 and the Unfair Contract Terms Act 1977 (UCTA), any clause that seeks to limit or exclude liability for misrepresentation must be reasonable to be enforceable. If a term unfairly prevents a party from seeking remedies for misrepresentation, a court can declare it invalid.
Fraudulent misrepresentation: A business cannot exclude liability for fraudulent misrepresentation under any circumstances.
Negligent misrepresentation: An exclusion clause may be valid only if it meets the UCTA’s reasonableness test.
Innocent misrepresentation: Businesses can sometimes exclude liability, but the affected party may still be entitled to rescission or damages in lieu.
How our misrepresentation solicitors can help
If you’ve been misled into signing a contract, you may be entitled to cancel the agreement or claim compensation. Likewise, if you’re facing a misrepresentation claim, having the right legal support can protect your interests. Our expert misrepresentation solicitors provide clear, straightforward advice to help you navigate the situation with confidence.
Case assessment: Our team can carefully review your contract, emails, and supporting documents to determine if you have a strong claim or defence.
Legal advice on options: We explain your rights in plain English, helping you decide whether to cancel the contract, claim damages, or negotiate a settlement.
Negotiation and dispute resolution: We aim to resolve disputes quickly and cost-effectively, avoiding court where possible. If legal action is necessary, we’ll stand by you every step of the way.
Why choose us?
✅ Clear, fixed-fee pricing: No hidden costs, so you know exactly what to expect.
✅ Expert guidance: Years of experience handling contract disputes.
✅ Straightforward advice: We keep things simple and focus on what’s best for you.
If you need help with a misrepresentation issue, get in touch today for trusted legal support.
What are your next steps?
If you suspect you’ve been misled into signing a contract, our expert misrepresentation solicitors can help you understand your rights and take legal action. Whether you need advice, contract rescission, or compensation, we’ll guide you through the process efficiently.
Get a personalised quote today and take the first step toward resolving your misrepresentation claim.
