Representation and Misrepresentation

Whenever you promote your products or services, telling prospective customers what they will gain, benefit or achieve by using your products or services – what you are doing is ‘making a representation’

In business, a representation is simply a statement of fact made by a seller or service provider with the purpose of getting a customer or client to become a party to a transaction. The presentation of facts may be by words or by conduct and it should induce a prospect to act. It is usually before the transaction and the opposite of a representation is a misrepresentation.

A misrepresentation is an untrue or misleading statement of fact made during negotiation by the seller to a buyer, the statement must have induced the buyer to transact with the buyer.

For a misrepresentation to be actionable in law, it has to fulfil three requirements: – there must be an untrue statement; – it must be a statement of fact, not mere opinion; – and it must have induced the innocent party to enter the transaction.

There are three types of misrepresentation:

1. Fraudulent misrepresentation 

Fraudulent misrepresentation occurs when a seller knowingly makes an untrue statement of fact which induces the buyer to enter the contract.

2. Negligent misrepresentation

Negligent misrepresentation can occur in some cases when a seller makes a careless statement of fact or does not have sufficient reason for believing in that the statement is true.

3. Innocent misrepresentation 

In innocent misrepresentation, a misrepresentation that has induced a party into a contract has occurred, but the person making the misrepresentation had reasonable grounds for believing it was true at the time the representation was made.

In each case of misrepresentation, an aggrieved customer or client can sue for damages depending on the harm caused to him due to the misrepresentation.