Misrepresentation in contract law is a false statement of fact made by one party to another during the course of negotiations which induces the other party to enter into a contract. The false statement can be made intentionally or unintentionally, but it must have played a significant role in inducing the other party to enter into the contract. There are three types of misrepresentation recognised in contract law:
Innocent Misrepresentation: This occurs when a false statement is made by one party to another, but the party making the statement did not know it was false and had no reason to suspect that it was false. This type of misrepresentation does not typically entitle the injured party to damages but may give him the right to rescind the contract.
Negligent Misrepresentation: This occurs when a party makes a false statement without having reasonable grounds for believing it to be true, or without taking reasonable care to ensure that it is accurate. The injured party may be entitled to rescind the contract and claim damages.
Fraudulent Misrepresentation: This occurs when a party makes a false statement with knowledge that it is false, or with reckless disregard for its truth. This type of misrepresentation entitles the injured party to rescind the contract and claim damages. It may also give rise to a claim for deceit.
It is worth noting that in order for a statement to be considered a misrepresentation, it must be a statement of fact, rather than an expression of opinion or a statement of future intentions unless the opinion is made by someone who is considered an expert in that context.
You can learn more about this topic and relevant case law with our Contract Law notes.