Misrepresentation under Contract Law

The term misrepresentation is a false statement of a material fact told by one party which directly affects the other party’s decision in correspondence to a contract. Once the misrepresentation is identified, the contract could be declared void and depending upon the situation, the unfavourably affected party may seek damages. In a contract dispute, the party who conducted the misrepresentation becomes the defendant and the affected party is the plaintiff.

Misrepresentation in the contract law is most important in business dealings where large transactions occur with high frequency. Misrepresentations of the value and risk intertwined with an agreement can cause huge financial losses to businesses and person while increasing the risk of corresponding business ventures. Accordingly, misrepresentation in contract law is vital for ensuring fairness and diminishing the risk for entering into the agreements between individuals and businesses.

Definition

Misrepresentation in contract law is defined under Section 18 of the Indian Contract Act, 1872 which provides that, a misrepresentation is a form of a statement made before the contract is completed. There are two kinds of statement that can be made before a contract is fixed, as follows:

1. Form the part of the contract.
2. Not form the part of the contract, hence it becomes a representation.

Concept of Misrepresentation

For understanding the concept of misrepresentation in the first, we need to understand the meaning of representation in terms of the contract. A representation is said to be a statement which conducts the entry into a contract but is not a part of a term of the contract.

Misrepresentation as the term suggests giving of inaccurate information by one party (or their agent) to the another before the contract is fixed which affects them to make the contract. If a person agrees into a contract about misrepresentation and has to face loss as a result, they can invoke the contract or claim damages.

Unwarranted Statements

A statement which is made without any reasonable basis is unwarranted. When a person tells a positive statement of a fact without any trustworthy source of information and believes such a statement to be true, such an act amounts to misrepresentation. For instance, discussing the merits of anyone’s talent is one thing, but addressing them stupid is unwarranted.

Breach of duty

Once a duty is being established concerning the defendant, we should find that the defendant has breached the duty. A breach of the duty of care happens only when one fails to achieve his or her duty of care to act wisely in any aspect. Commonly, if a party does not act reasonably to prevent foreseeable injuries to others, the duty of care is breached. Breach of duty is discussed in a very interesting case named Vaughn V. Menlove in which it was held that the defendant is found to have overdue of the claimant and if he acts below the reasonable standard then a breach of duty would be committed 

• they can find out the cause of the breach and try to remedy it;
• they can dispute that a breach has occurred;
• they can argue that there is an exclusion clause or other terms in the contract limiting their liability for the breach; or
• they could argue that there is a cause for their breach, or that the contract is invalid.