Misrepresentation in Contracts: Can You Claim Compensation?
Misrepresentation in contract law is when one party makes a false statement that induces the other into an agreement. Whether it was innocent, negligent, or fraudulent, this can significantly affect your rights. In this guide, we’ll clarify how you might claim compensation and how RDC can support your claim with clarity and confidence.
What Constitutes Misrepresentation?
A misrepresentation is an untrue statement of fact, or occasionally law, made by one party that induces another to enter into a contract. It is not necessary that the misled party verify the claim, as case law confirms reliance is sufficient.
One must prove that a false statement was made, that it was material and induced you to enter the contract, and that you suffered loss as a result.
Three Types of Misrepresentation & Remedies
1. Fraudulent Misrepresentation
This occurs where the statement was made knowingly false, believed not to be true, or recklessly made without caring about its truth. If proven, the remedies can include rescission, which involves cancelling the contract and restoring both parties to their pre-contract position, or damages in the form of compensation to cover all direct consequences.
2. Negligent Misrepresentation
Negligent Misrepresentation occurs where a statement is made carelessly and without reasonable grounds for believing it true. Under both common law and the Misrepresentation Act 1967, a misled party can pursue rescission and/or damages.
Section 2(1) of the Misrepresentation Act treats negligent misrepresentation as if fraudulent for damages purposes, meaning losses may be fully compensable, even if unforeseeable.
3. Innocent Misrepresentation
This is where the representor honestly believed the statement to be true and had reasonable grounds for that belief. Remedies are more limited in this case, and can include rescission (undoing the contract), or damages in lieu of rescission under Section 2(2) of the Misrepresentation Act.
Key Limitations and Considerations
Delay or affirmation
If you continue with a contract after discovering the misrepresentation (e.g. by accepting delivery), rescission may be barred.
Restitution impossible
If goods have been consumed, destroyed, or transferred, rescission may not be practicable.
Third-party rights
If a third party has acquired rights in the misrepresented asset, rescinding may be blocked.
Limitation clauses
Contracts may contain clauses excluding liability for misrepresentation. But under Section 3 of the Misrepresentation Act, these are enforceable only if reasonable under the Unfair Contract Terms Act.
How RDC Solicitors Can Help
Assessment & Strategy
We'll identify whether misrepresentation occurred, and of what type, through document review and communications.
Preserving Your Rights
Advising you to act promptly to avoid losing the right to rescind. For instance, we can help you formally indicate your intention to rescind.
Evidence & Rectification
We collect evidence: communications, expert reports, surveys, and financial records to quantify losses and support remedies.
Negotiation & Resolution
In many cases, disputes can be resolved via alternative dispute resolution, saving time, cost, and stress.
Court Proceedings
If necessary, we can pursue or defend rescission and damages claims in court, armed with robust evidence and legal arguments.
At RDC Solicitors, we bring legal expertise, clarity, and support to help clients assess their claims, act swiftly, and secure fair outcomes. Contact us today on Bingley 01274 723858, Ilkley 01943 601173 or Bradford 01274 735511.
