Misrepresentation : Meaning, Cases & Effects (Indian Contract Act)

What is Misrepresentation?

The definition of misrepresentation is provided under Section 18 of the Indian Contract Act 1872. “Misrepresentation is committed when the truth is misrepresented. Misrepresentation is the expressing of deceiving details resulting in the presumption that the other party will enter into a deal and then lose due to believing misrepresented facts.“

Under misrepresentation, the information provided by the guilty party is a result of a genuine belief, which the party believes and in such a case misrepresentation can be said to be committed. False information is shared at the beginning of the contract itself, the facts which are committed at the ground level may not be reliable at all and hence, it is considered a Misrepresentation of the contract. In this case, there can be Innocent Misrepresentation, and the other can be Negligent Misrepresentation. Misrepresentation can be of three types:

• When the person makes a positive assertion believing it to be true.
• When there is a breach of duty, it gives the person committing it an advantage by misleading another. But the breach of duty is done without any intent to deceive.
• When one party causes the other party to make a mistake as to the subject matter of the contract, this is done innocently and is not a deliberate action to commit misrepresentation.

Geeky Takeaways:

• Free consent is one of the elements which should be present in a contract, to make it valid and legally binding.
• To make a valid contract, one party should not have an undue advantage over the other, so consent is required to make the contract a fruitful junction between the two parties.
• When consent to an agreement is caused by either of any elements like coercion, fraud, misrepresentation, or undue influence, the agreement will be a contract voidable at the option of the party whose consent was so compromised
• Misrepresentation happens when someone says something untrue without trying to deceive.

Example of Misrepresentation

Suryansh told Darshika that his laptop was in good condition, and because of the confidence she had in Suryansh, Darshika bought the laptop from him. The laptop did not work properly after some time, Darshika thought he was misled by Suryansh, but Suryansh believed his laptop was in good condition as he had it serviced recently and had no intention of deceiving her. So, here Misrepresentation is on the part of Suryansh because he did not know that the laptop was not working properly.

Cases of Misrepresentation

1. Fraudulent Misrepresentation: Fraudulent misrepresentation happens when a false representation is made and the party making such representation knew it was false or was reckless to check as to whether such statement was a correct statement or an incorrect statement. Any lack of accurate belief while making a statement to be true will present it as a fraudulent misrepresentation.

For example, If Rahul honestly believes that the statement he made is true, it cannot be a fraudulent misrepresentation; any negligence shown in creating a false statement will not result in fraud. However, if it can be shown that Rahul suspected that the statement might be incorrect or wrong but made no efforts or inquiries to check the position of his statement, that will be sufficient. Furthermore, such a statement will not be mandatory to prove a dishonest motive.

2. Negligent Misrepresentation: Negligent misrepresentation, as mentioned under the Misrepresentation Act 1967, refers to when a declaration is made by one party to the contract and another party to the contract makes a statement negligently or without having any reasonable grounds for believing its truth. In such a case of negligent misrepresentation, there is no obligation to establish fraud. If the innocent party to whom the misrepresentation was made can prove that the statement made by the defaulting party was false, it will be on the maker of the statement to prove that he rationally believed in the truthfulness of the statement.

For example, A car salesman incorrectly stating a used vehicle’s accident-free history, while neglecting to verify, results in the buyer later discovering undisclosed damages. This leads to negligent misrepresentation.

3. Innocent Misrepresentation: Any misrepresentation of a statement or fact made completely without committing any fault can be referred to as an innocent misrepresentation. So, Innocent misrepresentation occurs when false information is shared without intent to deceive; for instance, a seller unintentionally provides inaccurate details about a product to a buyer.

For example, If Anmol is unable to point out that he had objective grounds to believe its declaration was true, the misrepresentation is going to be categorized as a fraudulent misrepresentation or negligent misrepresentation.

Effects of Misrepresentation

Section 19 of the Indian Contract Act establishes that when consent to an agreement is affected through misrepresentation, the aggrieved party to the contract may rescind the contract or avoid the performance of such contract. When consent is affected by misrepresentation, the contract will be voidable at the option of the aggrieved party; i.e., the affected party can either choose to rescind the contract to the extent that it has not been performed or he can choose to affirm the contract and seek remedies available under the law. Furthermore, it is advised that parties to the contract shall make sure that the consent of parties is free as if the consent is affected, legal remedies for the defaulting parties are either limited or restricted.

Conclusion

Misrepresentation is when either party makes facts or says something untrue, but the intention is not to deceive the other party. In the Indian Contract Act, misrepresentation is giving false information unintentionally, without any plan to mislead. Misrepresentation can involve making false statements or not sharing important information. Recognizing misrepresentation is crucial because, like fraud, it allows the innocent party to cancel the contract. There can be three types of misrepresentation: fraudulent, negligent, and innocent. Section 19 of the Indian Contract Act establishes that when consent to an agreement is affected through misrepresentation, the aggrieved party to the contract may rescind the contract or avoid the performance of such contract. 

Misrepresentation- FAQs

What is Free consent?

As per the provisions of Section 14 of Indian Contract Act, the consent is said to be free when it is not caused by the coercion, fraud, undue influence, fraud, misrepresentation or mistake.

How does the Indian Contract Act categorize misrepresentation?

Misrepresentation can be of three types:

i. When the person makes a positive assertion believing it to be true.

ii. When there is a breach of duty, it gives the person committing it an advantage by misleading another. But the breach of duty is done without any intent to deceive.

iii. When one party causes the other party to make a mistake as to the subject matter of the contract, but this is done innocently and is not a deliberate action to commit misrepresentation.

How can one prove fraudulent misrepresentation under the Indian Contract Act?

Misrepresentation is shown when a false representation has been made

(i) knowingly

(ii) without belief in its truth,

(iii) recklessly, careless whether it be true or false.

What remedies are available to the aggrieved party due to misrepresentation?

The affected party can either choose to rescind the contract to the extent that it has not been performed or he can choose to affirm the contract. The party may also insist over the performance of contract.

On whom does the burden of proof lie in the case of misrepresentation?

The burden of proof for proving misrepresentation under the Indian Contract Law lies with the party who is alleging misrepresentation.