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What is fraudulent misrepresentation?

On Behalf of | May 7, 2019 | Business Law |

When two or more parties enter into a contract, they stipulate that they’re in agreement on the terms of the contract. If a party knowingly makes false statements, it may be possible to hold them liable. These “statements” don’t necessarily have to be in writing. In fact, remaining silent about something could also be considered making a false statement. To rise to the level of fraudulent misrepresentation, however, the false statement must have a material effect on the agreement the parties have entered into.

Typically, a party accused of fraudulent misrepresentation is aware of what they’re doing. However, they don’t have to be if the false statement (or lack of information provided) was done recklessly. For example, an inventor who sells their idea to a manufacturer may state that the idea is completely unique. In fact, they may not have looked into whether anyone else was working on the same thing, and in fact, their invention isn’t unique.

If a business enters into a contract with someone based on a representation that was either known to be false or was made without knowing whether it was accurate, they may be able to hold them liable for fraudulent misrepresentation. If a business has suffered a loss as a result, they may be able to seek compensation for those losses.

However, the most common remedy if you’ve entered into a contract based on false pretenses is to rescind the contract. Fraudulent representation makes a contract voidable.

Having an experienced attorney review any contract you sign can help you avoid becoming the victim of fraudulent misrepresentation, However, if you believe you have a case, it’s wise to seek the advice of an attorney who can review the facts and help you determine your best recourse.


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