Misrepresentation is a concept found in contract law. It is any untrue statement of fact that induces a party to enter into a contract.
Misrepresentation may be negligent or fraudulent. Fraudulent misrepresentation arises when an individual purposely makes a false statement in order to trick another party into entering into an agreement.
Negligent misrepresentation arises when an individual unintentionally presents a false fact that induces the other party into entering into a contract. This means that the individual did not lie directly but, rather, made a statement that they were not aware was false at the time they made it.
Under contract laws and real estate laws, negligent misrepresentation is a civil wrong. This means that the victim of the negligent misrepresentation has the opportunity to sue for money damages in a court of law.
Negligence arises when an individual does not act reasonably under a given set of circumstances and as a result of that failure to act reasonably, they cause another individual to incur money damages. In the context of a contract, negligent misrepresentation is the failure to verify whether or not a statement of fact in the contract is truthful or correct.
How to Prove Negligent Misrepresentation?
In order for a plaintiff to succeed in a negligent misrepresentation claim, the plaintiff has to show that they relied on the untrue statement of fact when they were deciding whether to enter into the contract and that the misrepresentation actually resulted in damages for the plaintiff.
A party who is attempting to induce another party to enter into a contract owes the other party a reasonable duty of care to ensure that the representation of facts that leads them to enter into the contract is accurate.
As noted above, negligent misrepresentation arises when one party does not fulfill their duty of reasonable care to ensure that the representation of facts is true. It also arises when one of the parties makes a careless statement of fact even when there is not a sufficient basis for believing the truth of those facts.
A plaintiff has to prove the following elements to prevail in a negligent misrepresentation case:
- The defendant made a statement of fact while attempting to induce the plaintiff to enter into a business transaction or a contract;
- The statement of fact the defendant made was false, and the defendant did not exercise reasonable care and was careless when gathering and communicating that information;
- The plaintiff relied on the defendant’s misrepresentation when entering into the business transaction or contract; and
- The plaintiff suffered damages as a result of relying on the defendant’s misrepresentation.
In these types of cases, damages are usually economic or involve another type of calculable loss. In cases of negligent misrepresentation, emotional damages such as pain and suffering without any financial losses would typically not be considered available damages.
What Are the Defenses to Negligent Misrepresentation?
There are some defenses that may be available to a defendant who is being sued for negligent misrepresentation, including:
- Contributory negligence: The defendant may be able to claim that the plaintiff was also negligent and, therefore, they were also responsible for the damages that they incurred;
- For example, when an individual signs up to purchase a product or service, they may have had an opportunity to verify whether or not the defendant’s claim was true but chose not to do so;
- In a jurisdiction that allows this defense, if the plaintiff was found to have been negligent as well, then the plaintiff would not be able to recover any money from the defendant;
- Comparative negligence: In jurisdictions that have comparative negligence as an available defense, if the defendant is able to prove that the plaintiff was partially at fault, then the defendant’s liability will be reduced by that amount;
- For example, if a plaintiff was 40% at fault, then the plaintiff’s monetary recovery from the defendant will be reduced by that percentage;
- Assumption of risk: The defendant may be able to claim that the plaintiff voluntarily assumed the risk of entering into the transaction and the plaintiff was not induced or compelled by the defendant;
- Statement of opinion rather than fact: Misrepresentation claims are generally based on facts and not on opinions, even if they are false. A defendant may claim that they were merely expressing their opinion, which may have turned out to be false, and that they did not make any false statement of fact to the plaintiff; and
- Puffery: Puffery includes any extravagant or exaggerated statement that was made to attract a buyer to a particular product or service. It is commonly used in advertising and marketing, and it is assumed that most consumers would not take the puffery literally;
- One example of puffery would be to claim that a pizza restaurant is the best in a specific city.
What Are the Other Types of Misrepresentation?
In addition to negligent misrepresentation, there are also other types of misrepresentation, including those based on innocence or fraud. Innocent misrepresentation arises when a party had a reasonable basis to believe that their statement of fact was true at the time they made it to the other party, but it turned out to actually be false.
In order for a party to pursue damages in cases of innocent misrepresentation, a plaintiff must show that they suffered damages as a result of the misrepresentation. This is different from negligent misrepresentation because the party presenting the fact had reason to believe it was true, even though it was not.
Fraudulent misrepresentation, on the other hand, arises when the party knowingly and deliberately makes a false statement of fact that induces the other party to enter into the contract. Fraudulent misrepresentation may also apply in cases where one of the parties is reckless with regard to the truth of their statement of facts.
Fraudulent misrepresentation is serious and may cause damage to both the reputation of the defendant as well as the company they are associated with.
What Is Non-Disclosure?
Typically, when an individual thinks of non-disclosure, they think of a contract or part of a contract that prohibits an individual from sharing confidential information. This is different from non-disclosure in these types of contract cases.
Non-disclosure, in this context, refers to one of the parties failing to tell the other party a fact regarding a contract or circumstances surrounding an issue. This is related to misrepresentation because they both typically refer to information or facts that are withheld or misrepresented by one of the parties and imply negligence on the part of that party.
Should I Contact a Lawyer?
If you are involved in a contract, and you believe negligent misrepresentation or any other type of misrepresentation may have occurred, it is important to consult with a contract lawyer quickly. It may be difficult to prove all of the required elements of negligent misrepresentation.
Because of this, it is best to have a lawyer representing your interests and helping you obtain damages for the losses you incurred. An attorney will know what types of evidence can best prove your claim.
If you have been accused of or sued for negligent misrepresentation or another type of misrepresentation related to a contract, it is important to have a lawyer represent your interests so you will not be required to pay damages if you did not misrepresent facts related to the contract.
