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Proving misrepresentation in court: What You Need to Know
Misrepresentation can be a complicated area of law. A careful analysis needs to take place of the specifics of the misrepresentation, and of the circumstances of the parties, in order to determine whether or not legal remedies are available.
In this article, we explore misrepresentation in contract law. Also, we provide information to help you minimise the risk of being the victim of misrepresentation or being liable for it.
What is misrepresentation in contract law?
Misrepresentation is a false statement of fact, made by one party to another, during the negotiation of a contract, which induces the other party to enter into the contract. The misrepresentation may be made intentionally, recklessly or innocently.
If the statement turns out to be false and the other party suffers a loss, then the innocent party may have a claim for damages for the misrepresentation. The innocent party may also be entitled to rescind the contract, if the misrepresentation is deemed to be a material one.
What are the types of misrepresentation?
There are three types of misrepresentation:
- Innocent misrepresentation occurs when the person making the statement honestly believes it to be true, but it turns out to be false.
- Negligent misrepresentation occurs when the person making the statement fails to take reasonable care to ensure that the statement is accurate.
- Fraudulent misrepresentation occurs when the person making the statement knows that it is false, or is reckless, as to whether it is true or false.
What is the difference between misrepresentation and fraud?
Fraud requires an element of intention which is not required for misrepresentation. In order to prove fraud, it must be shown that the person making the false statement, knew that it was false, or was reckless, as to whether it was true or false, and made the statement with the intention of deceiving the other party. Misrepresentation, on the other hand, can be innocent or negligent and does not require proof of intention.
What are the remedies for misrepresentation?
If a misrepresentation is proven, and the innocent party suffers a loss, there are several remedies available which are listed below:
- The innocent party may be entitled to rescind the contract which means that the contract is treated as if it never existed.
- The innocent party may choose to affirm the contract and seek damages for the loss suffered as a result of the misrepresentation.
- Damages for a monetary sum may be awarded. The damages will depend on the type of misrepresentation and the loss suffered by the innocent party.
How can a misrepresentation be proven in court?
In order to prove misrepresentation in court, the innocent party must demonstrate that a false statement of fact was made, that the statement induced them to enter into the contract, and that they suffered a loss as a result of the misrepresentation.
The type of misrepresentation will also need to be established, as this will determine the burden of proof required. For innocent misrepresentation, the innocent party must show that the statement was false, whereas for fraudulent misrepresentation, they must show that the person making the statement knew that it was false or was reckless as to whether it was true or false. In some cases, expert evidence may be required to establish whether a statement was false or misleading.
A recent example of a claim for fraudulent misrepresentation is the High Court case of (1) QIPDH (2) Sheikh Hamad Bin Abdullah Al Thani Vs (1) John Eskenazi Limited (2) John Eskenazi  EWHC 3023 (Comm).
Sheikh Hamad purchased 7 ancient artefacts for £4.2 million between 2014 – 2015 from John Eskenazi Ltd, a specialist London antiquities dealer. The sale discussions were between Sheikh Hamad and Mr Eskenazi, but the invoices were in the name of the respective companies. The 7 artefacts were forgeries.
QIPDH and Sheikh Hamad started a claim against Mr Eskenazi’s Company, and Mr Eskenazi in his personal name, for: (a) breach of contract, (b) tort of negligence (c) fraudulent misrepresentation (d) fraud which was limited to one artefact. Also, expert evidence was obtained to support the claim that the 7 artefacts were forgeries.
Eskenazi’s main defence was: (a) no fraudulent misrepresentations were made about the 7 artefacts and he acted in good faith (b) any misrepresentations were innocent rather than fraudulent (c) all the information about the artefacts was presented to Sheikh Hamad who was a sophisticated buyer.
In the end, Sheikh Hamad succeeded with the claim for a breach of contract, tort and fraudulent misrepresentation. The claim for fraud was not proven and dismissed. Sheikh Hamad was entitled to rescind the contracts and to recover the sum paid of £4.2 million plus legal costs.
This article is intended for guidance only and must not be relied upon for specific advice.