What is misrepresentation in contract law?

Contracts rely heavily on trust. If one party to an agreement engages in fraudulent or deceptive behaviour, there’s a breach of trust. This is called misrepresentation. In the contract law of India, misrepresentation can render a contract voidable and entitle the other party to certain remedies. Let’s simplify this.

Understanding Misrepresentation in Contract Law

In contract law, misrepresentation is the false statement of facts purported by one party to another before or at the time of making the contract. The false statement causes the second party to enter into the contract.

The important part is about the influence. If the false statement had a bearing on your decision to enter into a contract, it is a misrepresentation in Indian law.

Categories of Misrepresentation in Indian Contract Law

The different types of misrepresentation identified by the contract law of India include:

●       Innocent Misrepresentation: In case a person makes a false statement not with the intention to deceive others, it is called misrepresentation. He who makes the statement thinks that it was indeed true at the time of speaking.

●       Negligent Misrepresentation: Here, the statement is made in negligence in that the facts have not been verified. There is an absence of intention to cheat; it is carelessness.

●       Misrepresentation by Silence: In some instances, silence can be regarded as misrepresentation. This is the case when there is an obligation to reveal important information, as is the case with insurance.

Essential Elements of Misrepresentation

For a statement to be a misrepresentation, the following has to exist:

●       The statement must pertain to a material fact

●       It must be a false statement

●       The statement must have been made prior to the formation of the contract

●       It must have influenced the other party to enter into the contract

●       The party affected must have relied on it

Generally, bare opinions, promises pertaining to the future, or unreasonable exaggeration will not be misrepresentation.

How Misrepresentation Affects a Contract

In case a misrepresentation has been proven, the contract becomes voidable at the option of the aggrieved party. This means that, as a matter of option, the aggrieved party can:

●       Terminate the contract or

●       Demand performance of the contract and claim damages, if applicable.

However, relief is not always granted if the party had a chance to find out the truth by way of normal diligence.

Consideration vs Misrepresentation in Contract Law

People often ask in contract law, what is consideration, and how is it different from misrepresentation.

Consideration is what the parties agree to give and receive in a contract. Misrepresentation, on the other hand, has to do with the lies that lead to the party giving their consent.

Both consideration and misrepresentation involve contract law. Consideration is based on the fact that the parties have to give or promise something to each other. Misrepresentation relates to false statements that influence consent.

Why Misrepresentation is Important in Indian Contracts

In the contract law of India, free consent is a fundamental principle. Contracts based on deceptive information are a serious violation of the principles of fairness and the law. A comprehensive understanding of misrepresentation enables individuals and enterprises to exercise their rights and avoid entering into perilous contracts.

Final Thoughts

Misrepresentation in contract law is about the truthfulness and the sincerity of the parties to the contract at the time the contract is made. Contract law distinguishes between intentional and careless misrepresentation, and the legal consequences can be tremendous. When you understand how misrepresentation works in contract law and when you understand the basic principles of what consideration in contract law means, you are better placed to make rational and lawful decisions.

The rule of thumb is to check the relevant facts and circumstances before signing a contract. It is wiser to be safe, especially to circumvent substantial legal complications in the future.