There are three types of misrepresentation in the contract law:
Fraudulent misrepresentation
Fraudulent misrepresentation occurs when a false representation is made and the party making the representation, for example, X knew it was false and reckless as to whether it was correct or incorrect- the lack of a correct belief in their truth will be present in a fraudulent one. If for example A honestly believes the statement to be true it will not be a fraudulent misrepresentation, negligence in conducting a false statement will not happen in fraud. Therefore, if it can be proved that A suspected that the statement made could be incorrect or wrong, but made no enquiries to check the position, it will be sufficient. It is not mandatory to prove a dishonest motive.
Negligent misrepresentation
Negligent misrepresentation under the Misrepresentation Act 1967 (MA 1967) provides that where a declaration is made by one of the contracting parties to another negligently or without reasonable grounds for believing in truth. The test is an impersonal one.
There is no obligation to establish such fraud. If the innocent party can prove that statement was false, it will be for the conducting of the statement to establish that it rationally believed in the truth of that statement.
Innocent misrepresentation
Misrepresentation done completely without fault of anyone can be termed as an innocent misrepresentation.
Inducing mistake about subject matters
Inducing mistake about any subject matter includes around mistake of fact. It occurs when both the parties misunderstood each other leaving them at a crossroads. Such an illicit act or a mistake can be because of an error in an understanding, or ignorance or omission etc. But a mistake is never intentional, it is an innocent commanding. These mistakes can either be unilateral or bilateral as explained below.
Bilateral Mistake
Section 20 defines the bilateral mistake. Where both the parties of a contract are under a mistake of fact required for the agreement, such a mistake is called a bilateral mistake. In a case both the parties have not permitted or given their consent in the same sense as provided by the definition of consent. Considering consent is absent further the agreement becomes void.
Therefore, to make an agreement void the mistake of fact could be about some crucial fact that should be important in a contract. So, if the mistake is about the presence of any subject matter or its title, quality, price etc it would become a void contract. But if the mistake is regarding something inconsequential, then the agreement becomes non-void and the contract will be in place.
Unilateral Mistake
A unilateral mistake is such that where only one person to the contract is under a mistake. In that case, the contract will not be considered void. So under Section 22 of the Act, it is provided that just due to one party was under a mistake of fact the contract will not become voidable or void. Therefore, if only one party has made a mistake of fact the contract remains a valid contract.
