Types of Misrepresentation in Business

Many businesses make their money off contracts that they have with individuals and other businesses. When you agree to a contract with another party, you are putting your trust in them. You assume that they will hold up their end of the deal and meet their obligations. If they don’t, your business is on the line. You could lose money and even have to shut down operations.

However, not every person you come across in your business will be trustworthy. When a party misrepresents themselves in any way, it can lead to dire consequences. Misrepresentation is a type of business tort. A misrepresentation is defined as a false statement made to coerce a party to enter a contract. A party can misrepresent several aspects of a business deal, including its intentions, position or material aspects.

If you were affected by misrepresentation in a contract, you may be able to pursue a claim against the liable party. You would have to prove that you relied on the false statement when agreeing to the contract and that the misrepresentation led to damages. Note that an opinion is not considered misrepresentation, whether or not the other party agrees with it. Here are the three types of misrepresentation you should look for when signing a contract. 

Innocent Misrepresentation 

This is the least serious type of misrepresentation. This occurs when a party makes a statement that they truly believe to be true but it is actually false. They did not intend to deceive the other party. They may have been given false information that they passed on to the other party, not knowing it was untrue. A victim of innocent misrepresentation can still seek damages.

Negligent Misrepresentation

This is a step above innocent misrepresentation. This occurs when a party makes a careless statement or makes claims without facts to back them up. When the other party in the contract relies on these statements to convince them to sign a contract, then they can pursue damages as well as get the contract rescinded.

Fraudulent Misrepresentation

This is the most serious type of misrepresentation in the business world. This is when a party knowingly makes false statements in order to coerce the other party to sign a contract. It can also occur when the party does not believe the truth of their statement or they are reckless in proclaiming something as the truth. A victim of fraudulent misrepresentation can claim damages as well as rescission of the contract. 

Seek Legal Help

Misrepresentation is a common business tort. It can lead to legal disputes and financial issues and take an emotional toll on a business owner.  Any deal should be made in good faith. A person who intends to commit fraud should be punished.

If you are a victim of a business tort, don’t try to handle the situation on your own. Fort Lauderdale business torts lawyer Edward J. Jennings, P.A. can you the advice and representation that you need to succeed in your case. Fill out the online form or call 954-764-4330 to schedule a consultation.