Innocent Misrepresentation: Understanding the Finer Details

innocent misrepresentationAny individual or business owner that deals with contracts on a regular basis knows that they are dependent on the validity of that contract for a sound and secure business. Unfortunately, sometimes circumstances may arise where information in a contract is false, even if the individual who wrote the contract was not initially aware that this was the case.

If you are a small business owner or an entrepreneur of any kind, then it is important to understand what innocent misrepresentation is and how it can affect you. Consider checking out Udemy’s course offering Legal Advice for Entrepreneurs and Startups in order get the legal know-how you need to avoid this type of pitfall.

What is Misrepresentation? 

Misrepresentation indicates when someone has been persuaded into signing a contract under the influence of a false statement. In other words: a lie. In all instances this misrepresentation may be grounds for a lawsuit. If you are a lawyer in this field you might consider taking either Udemy’s course on QuickBooks training or on mastering Outlook so that you can spend more time focused on helping clients with misrepresentation than keeping your books together.

There are three types of misrepresentation: negligent, fraudulent, and innocent. Negligent misrepresentation is when a person did not directly lie but inferred the lie through other language that caused the sale or signing of contract. Fraudulent misrepresentation means that the seller lied, and did so willingly, with the sole purpose of deception for his or her own benefit. The third type, innocent misrepresentation, is what we’ll cover in the rest of this article.

What is Innocent Misrepresentation?

Innocent misrepresentation is when the person making the false claim had every reason to believe that their statement was true. Innocent misrepresentation awards a level of ‘benefit of the doubt’ to the party that misrepresented themselves.

It is quite difficult to prove negligent or fraudulent misrepresentation. Therefore, innocent misrepresentation is most often the primary course of action left available to a dissatisfied party who feels that they have been tricked into signing a contract for goods or services that were not equivalent to what they believed they would be receiving.

What Can Be Defined as Innocent Misrepresentation?

Several factors must be established to prove that a discrepancy in a contract was the result of innocent misrepresentation. First, a person must have made a false representation. In other words, if the statement was false at the time of sale or contract signing and remains false, it falls under innocent misrepresentation. If the statement later proves to be true, then the entire case will likely have to be thrown out.

The false statement has to be material to the exchange. That means it must have been a key element in the exchange. On top of this, the other member of the exchange must have relied upon the lie in order to agree to the contract. A good question to ask to discern this would be: “Would someone have bought the item if the misrepresentation had not been stated?” If the answer is yes, then this no longer counts as misrepresentation of any kind. It is critical that the exchange happened with substantial reliance on the lie itself.

The misrepresentation must also cause the buyer or signer to suffer damages. In order to file a lawsuit, it is important to be able to prove that damages were incurred. Damages in themselves are sufficient, and the type of damage does not matter so long as it existed.

The final category applies solely for innocent misrepresentation and no others. This is concerned with the loss to one party benefitting the other. In other words, if the person who made the misrepresentation does not benefit it cannot be considered innocent misrepresentation. In this case, the courts can determine the measure of benefit.

How is Innocent Misrepresentation Punished or Remedied? 

Innocent misrepresentation is a civil offense and can only be dealt with in civil court, and not criminal court. Most often if a case of innocent misrepresentation is found the court will decide on a process of rescission. This is a simple and easy way to rectify the problem. The item is returned to the original owner and any money given for it is returned to the buyer.

Any misrepresentation can be incredibly frustrating and make a person feel as if they are taken advantage of. However, as mentioned above, fraudulent and negligent misrepresentation is incredibly hard to prove. Therefore, innocent misrepresentation is a good way to rectify any conflict in relation to goods and services with little fuss and still in a court of law.

Understanding innocent misrepresentation is a good introduction to the world of law. From there you might want to step into a legal assistant career. If this interests you, don’t forget to start by checking out Udemy’s course on becoming a legal assistant. This can give you a good base from which to advance both in the legal world and in your every day legal dealings.