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Fraudulent Misrepresentation: What You Need to Know


All parties must agree to a contract’s terms and conditions before the agreement is finalized. However, when one party lies or omits information that causes the other party to enter that agreement, it is considered fraudulent misrepresentation. 

In some cases, this type of fraud can invalidate the contract and hold the offender liable for their actions. Moreover, in this day and age, fraud is on the rise. As a result, it is vital to understand what it is, how to avoid it, and what to do if you believe you are involved in fraudulent misrepresentation. 

What is Fraudulent Misrepresentation?

Fraudulent misrepresentation, is a civil tort of contract law. It is a false statement of fact that causes a party to enter a binding agreement based on the information. Misrepresentation can occur through written or spoken words, actions, or inactions.

Essentially, fraudulent misrepresentation, occurs when someone omits or misrepresents pertinent information from the other party. For the defendant to be found liable, the court must prove some key elements:

  • A representation of fact was made.
  • The statement of fact is false.
  • The defendant was aware of the false statement or otherwise acted recklessly without full knowledge of the truth.
  • The defendant’s false statement was intended to encourage the plaintiff to rely on its information. 
  • The plaintiff relied on the false statement; they would not have agreed if not for the misrepresentation.
  • The plaintiff suffered damages as a direct result of the fraudulent information.

It is important to note that each case is unique, and circumstances will vary. Additionally, the elements that prove liability for fraudulent misrepresentation can differ by state and jurisdiction. As such, it is recommended that you take advantage of free consultations. An attorney can help you understand your options to make informed decisions.

Types & Examples

Fraudulent behavior can come in different forms and depends on various factors. Consider how an agreement’s unique circumstances can affect the court’s ruling. For example, suppose there is a history of dealing between the parties. In that case, the judge may investigate the matter before determining if the misrepresentation occurred. 

As previously mentioned, misrepresentation can transpire through written or spoken words, actions, or inactions. Common types of fraudulent misrepresentation may include:

  • Presenting a false statement to the other party.
  • Presenting statements of “half-truths” or “white lies.”
  • Omitting details or chunks of information altogether that encourage the other person to understand or believe something false.
  • Remaining silent (inaction) or failing to disclose essential information to the other party. This can be further complicated when parties are legally required to provide such information.

One example of fraudulent misrepresentation is when a company sells a faulty product although they claim it is in good working order. Also, consider instances where individuals present falsified or inaccurate documents. No matter the intended use of such documents, if they are falsified, they are fraudulent.

It is important to emphasize that individuals can also be liable for this fraud if they assert claims they should have known were false due to their training or background. In other words, the court will consider all factors during these proceedings, including the qualifications and background of each party involved. If you find yourself facing such complex legal matters, consulting a qualified lawyer with expertise in contract law can provide invaluable guidance and representation.

Damages & Legal Remedies 

Several legal remedies are available to those who have fallen victim to fraudulent behavior, including money damages, injunctions, and contract reformation or recission. Suing for money damages allows victims of fraud to recover financial losses due to the deceit. 

Injunctions are another remedy in which the court issues an order prohibiting fraudulent behavior from continuing. Moreover, contract reformation or recission allows the contracting parties to amend the contract’s terms and conditions or void the agreement altogether. 

It is important to emphasize that the court will formulate remedies based on how much harm or loss the Plaintiff suffers. So, in most cases, the remedy for fraudulent misrepresentation is monetary damages. This can include the difference between the value one party expected and the value they actually received.

Additionally, more than one party can be held liable and be required to pay damages. For example, suppose a supervisor asks their employer to falsify documents, and the employer willingly does so. In that case, both may be found liable and may be required to pay damages to the Plaintiff for the harm caused. In extreme cases where the misrepresentation has substantially affected the terms of the contract, the court may consider contract reformation to rectify the agreement’s terms and restore fairness to both parties.

Defenses for Fraudulent Misrepresentation 

There are defenses available for individuals who are charged with fraudulent misrepresentation. These defenses depend on many factors, including state laws, the nature of the claim, and the damages suffered, to name a few. Nevertheless, some common defenses include:

  • Lack of evidence: If insufficient evidence proves fraud, the defendant may not be held liable.
  • Laches: If the plaintiff surpassed the statute of limitations for their case, the defendant could claim Laches as a legal defense.
  • No reliance/Immateriality: If the plaintiff did not base their decision on the fraudulent misrepresentation, or if they knew it was false, they cannot recover damages. In other words, the defendant may not be liable if the misrepresentation was not significant or relevant to the plaintiff’s decision.
  • No damages: If the plaintiff did not suffer measurable harm from the fraud, they cannot recover compensation for damages.
  • Truth: If the plaintiff was aware of an apparent or exaggerated misrepresentation or should have known the statement was false, they may be unable to support their fraud claim.
  • No intent: If the misrepresentation was not intentional or the defendant made the claim in good faith or as an opinion, they may not be liable.
  • Coercion/duress: If the defendant was forced to make a false statement under threat of harm or other coercion, they may not be liable.

Other defenses may apply, as it depends on the unique circumstances of each case. At any rate, it is essential to collect evidence and consult a contract lawyer if you believe you are involved in fraudulent misrepresentation. 

Avoiding Fraudulent Misrepresentation

To avoid fraudulent misrepresentation, remaining honest and accurate when presenting statements, information, or promises to other parties is essential. More specifically, you must not lie, exaggerate, or omit any pertinent information that may affect another party’s decision.

Additionally, you should provide evidence or proof of your claims when making statements or promises. Likewise, when another party makes a claim, request evidence or proof that may support their assertions. It is crucial not to rely on opinions or presumptions and to maintain records of all communications and transactions with other parties. 

Moreover, parties should conduct due diligence by reviewing all contract terms and conditions before making formal commitments. You can do this by reading and understanding your contract before you sign it. If something is unclear, bring it to the attention of other parties. Clarify misconceptions and be as specific as possible. Having a contract lawyer review the agreement to ensure it is legally binding and in your best interest is also recommended. 

Lastly, if you suspect you are involved in fraudulent misrepresentation, you should consult an attorney and determine your legal options. Among them might be rescinding the contract and suing for damages. 


Fraudulent misrepresentation is a serious offense that can have significant legal and financial consequences for the offender. It is essential to conduct due diligence before entering into any binding agreement with another party, especially when fraud is on the rise. 

Legal remedies are available to you if you have been a victim of fraudulent misrepresentation. It is vital to consult a contract lawyer to understand your options and make informed decisions based on the unique circumstances of your case.

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