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Misrepresentation

An assertion or manifestation by words or conduct that is not in accord with the facts.

Misrepresentation is a tort, or a civil wrong. This means that a misrepresentation can create civil liability if it results in a pecuniary loss. For example, assume that a real estate speculator owns swampland but advertises it as valuable commercially zoned land. This is a misrepresentation. If someone buys the land relying on the speculator's statement that it is commercially valuable, the buyer may sue the speculator for monetary losses resulting from the purchase.

To create liability for the maker of the statement, a misrepresentation must be relied on by the listener or reader. Also, the speaker must know that the listener is relying on the factual correctness of the statement. Finally, the listener's reliance on the statement must have been reasonable and justified, and the misrepresentation must have resulted in a pecuniary loss to the listener.

A misrepresentation need not be intentionally false to create liability. A statement made with conscious ignorance or a reckless disregard for the truth can create liability. Nondisclosure of material or important facts by a fiduciary or an expert, such as a doctor, lawyer, or accountant, can result in liability. If the speaker is engaged in the business of selling products, any statement, no matter how innocent, may create liability if the statement concerns the character or quality of a product and the statement is not true. In such a case, the statement must be one of fact. This does not include so-called puffing, or the glowing opinions of a seller in the course of a sales pitch (such statements as "you'll love this car," or "it's a great deal").

A misrepresentation in a contract can give a party the right to rescind the contract. A Rescission of a contract returns the parties to the positions they held before the contract was made. A party can rescind a contract for misrepresentation only if the statement was material, or critical, to the agreement.

A misrepresentation on the part of the insured in an insurance policy can give the insurer the right to cancel the policy or refuse a claim. An insurer may do this only if the misrepresentation was material to the risk insured against and would have influenced the insurer in determining whether to issue a policy. For example, if a person seeking auto insurance states that she has no major chronic illnesses, the insurer's subsequent discovery that the applicant had an incurable disease at the time she completed the insurance form probably will not give the insurer the right to cancel the auto policy. However, if the person was seeking Health Insurance, such a misrepresentation may justify cancellation of the policy or a denial of coverage. Generally, cancellation or denial of insurance coverage for a misrepresentation can occur only if the insurance applicant was aware of the inaccuracy of the statement.

Further readings

Kionka, Edward J. 1988. Torts. St. Paul, Minn.: West.

Cross-references

Consumer Protection; Product Liability; Sales Law; Tort Law.

misrepresentation

n. the crime of misstating facts to obtain money, goods, or benefits of another to which the accused is not entitled. Examples: a person 1) falsely claims to represent a charity to obtain a donation which he/she keeps; 2) says a painting is a genuine Jackson Pollock when it is a fake, and is thus able to sell it for a price much greater than its true value. Misrepresentation is also called "false pretenses." (See: false pretenses)

misrepresentation

representing something incorrectly. A misrepresentation is distinct from a statement of opinion. It may have the effect of making an otherwise valid contract void or at least voidable. A distinction is made between innocent, negligent and fraudulent misrepresentations. At best, an innocent misrepresentation may affect a contract, a negligent misrepresentation may attract in addition liability for negligence and a fraudulent misrepresentation may attract damages for the fraud and deceit. See also MISTAKE.

MISREPRESENTATION, contracts. The statement made by a party to a contract, that a thing relating to it is in fact in a particular way, when he knows it is not so.
     2. The misrepresentation must be both false and fraudulent, in order to make the party making it, responsible to the other for damages. 3 Com. R. 413; 10 Mass. R. 197; 1 Rep. Const. Court, 328, 475, Yelv. 21 a, note l; Peake's Cas. 115; 3 Campb. 154; Marsh. Ins. B. 1, c. 10, s. 1. And see Representation. It is not every misrepresentation which will make a party liable; when a mere misstatement of a fact has been erroneously made, without fraud, in a casual, improvident communication, respecting a matter which the person to whom the communication was made, and who had an interest in it, should not have taken upon trust, but is bound to inquire himself, and had the means of ascertaining the truth, there would be no responsibility; 5 Maule & Selw. 380; 1 Chit. Pr. 836; 1 Sim. R. 13, 63; and when the informant was under no legal pledge or obligation as to the precise accuracy and correctness of his statement, the other party can maintain no action for the consequences of that statement, upon which it was his indiscretion to place reliance. 12 East, 638; see also, 2 Cox, R. 134; 13 Ves. 133; 3 Bos. & Pull. 370; 2 East, 103; 3 T. R, 56, 61; 3 Bulstr. 93; 6 Ves. 183; 3 Ves. & Bea. 110; 4 Dall. R. 250. Vide Concealment; Representation; Suggestio falsi; Suppressio veri.

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