In common law jurisdictions, a misrepresentation is an untrue or misleading statement of fact made during negotiations by one party to another, the statement then inducing that other party to enter into a contract. The misled party may normally rescind the contract, and sometimes may be awarded damages as well (or instead of rescission).
The law of misrepresentation is an amalgam of contract and tort; and its sources are common law, equity and statute. In England and Wales, the common law was amended by the Misrepresentation Act 1967. The general principle of misrepresentation has been adopted by the United States and other former British colonies, for example India.
Representation and contract terms.
A "representation" is a pre-contractual statement made during negotiations. If a representation has been incorporated into the contract as a term, then the normal remedies for breach of contract apply. Factors that determine whether or not a representation has become a term include:
The relative expertise of the parties.
The reliance that one party has shown on the statement.
The reassurances given by the speaker.
The customary norms of the trade in question.
The representation forms the basis of a collateral contract.
Otherwise, an action may lie in misrepresentation, and perhaps in the torts of negligence and deceit also. Although a suit for breach of contract is relatively straightforward, there are advantages in bringing a parallel suit in misrepresentation, because whereas repudiation is available only for breach of condition, rescission is prima facie available for all misreps, subject to the provisions of s.2 of the Misrepresentation Act 1967, and subject to the inherent limitations of an equitable remedy.
