In contract law, a misrepresentation is when a party to a contract makes a representation by words or conduct that conveys a false or misleading understanding that has the effect of inducing a party in entering the contract. For example, under certain circumstances, false statements or promises made by a seller of goods regarding the quality or nature of the product that the seller has may constitute mispresentation. A finding of misrepresentation allows for a remedy of recission and sometimes damages depending on the type of misrepresentation.

Representation is not a term

To seek a remedy under misrepresentation it must first be determined that the representation is not a term of the contract (i.e. a warranty). This is determined objectively by the trier of fact by looking at the time that the representation was made, the closer to the moment of contract formation the more likely it is a term, and if there is any mention of the representation in writing that could be construed as part of the contract.

As well, the Courts will often attempt to find a collateral contract by interpreting the representation as a promise accompanied by some sort of consideration (see Heilbut, Symons & Co. v. Buckleton [1913] A.C. 30 (H.L.)). The collateral contract will have the effect of adding the representation as a term to the contract.

If the representation is found to be a term then the normal remedies for breach of contract apply.

Types of misrepresentation

Fraudulent misrepresentation is when the representation made with intent to deceive and with the knowledge that it is false. This is generally a difficult type of misrepresentation to prove but allows for a remedy of both damages and recission. An action for fraudulent misrepresentation can also be brought as a tort.

Innocent misrepresentation is when the representation is made with an honest belief that it is true. This type of representation only allows for a remedy of recision.

Negligent misrepresentation is when the representation is made carelessly. This class of misrepresentation is relatively new and was introduced in order to allow for a remedy of damages in situations where neither a collateral contract nor fraud could be found. It was first seen in the case of Hedley Byrne v. Heller [1964] A.C. 465 where the court found that a statement made negligently that was relied upon can be actionable in tort. Lord Denning in Esso Petroleum Co. Ltd. v. Mardon [1976] Q.B. 108 however, transported the tort into contract law, stating the rule as:

if a man, who has or professes to have special knowledge or skill, makes a representation by virtue thereof to another...with the intention of inducing him to enter into a contract with him, he is under a duty to use reasonable care to see that the representation is correct, and that the advice, information or opinion is reliable