Home » Eng Accounting » M » Misrepresentation


If a person induces another to form a contract by falsifying certain information, he is guilty of misrepresentation. This may be innocent or fraudulent. If the person who made the representations can show that he believed them correct, the misrepresentation is innocent. In this case the injured party cannot always claim damages, though he can rescind the contract if he can show (1) that he has not implicitly accepted the misrepresentation, (2) that he has acted promptly, (3) that no innocent third parties have obtained rights in the subject matter for value (i.e. some kind of payment, and (4) that the parties can be restored to their former positions. The injured party can claim damages for innocent misrepresentation if (1) an agent has misrepresented his authority, (2) misrepresentations have been made in a prospectus, (3) misrepresentation is in the form of a condition or warranty or (4) there is a special relationship between the parties (a solicitor or banker, for instance, has a legal duty to take care). though in this case there would have to be negligence. The Misrepresentation Act 1967 gives additional aid to victims of innocent misrepresentation in certain cases. Fraudulent misrepresentation entitles the injured party to damages and rescission.

Reference: The Penguin Business Dictionary , 3rd edt.