What is Business Misrepresentation?
A business misrepresentation occurs when one party makes a false statement affecting the other party’s decision to enter into a contract.
Parties cannot misrepresent the critical facts when entering into business transactions. Untrue statements may result in a business lawsuit.
The intent to deceive another party during a business deal is fraudulent misrepresentation. This type of misrepresentation is considered active fraud and is the most complex and severe. Fraudulent misrepresentation renders the contract voidable, and victims can seek to recover damages.
Critical Elements of Fraudulent Misrepresentation
- One party knowingly makes false statements with the intent to coerce the other party into a contract.
- The incorrect information is material to the transaction.
- One party suffers damages as a result of the distorted facts.
Other Types of Misrepresentation
Innocent misrepresentation occurs when a person is unaware at the time of entering a contract that the statement declared was untrue. This situation typically results in the recission of the agreement.
Negligent misrepresentation happens when one party fails to ensure the accuracy statements before the contract signing.
Parties entering into a contract are held accountable by contract law. Actionable misrepresentations must be inaccuracies of laws or facts, not opinions. A commercial insurance program can protect from claims based on allegations of business misrepresentation.