Three Types of Misrepresentation in Commercial Law

Lawyer taking notesA contract is arguably the most important document when running a business. This document spells out various terms and obligations between you and your partners, clients, and suppliers. Most business owners primarily depend on the goodwill and honesty of all parties involved when signing a contract.

Without commercial lawyers on the payroll of your Townsville business, however, you leave your company at the risk of losses from misrepresentation. Misrepresentation refers to any untrue claim which induces you to enter a contract.

Here are the three primary categories of misrepresentation in commercial law:

Fraudulent Misrepresentation

This occurs once one party in a contract makes a false statement which induces the other to sign the contract. Fraudulent misrepresentation can also arise when the other party in your contract makes a reckless statement in regards to its truth. Victims of fraudulent misrepresentation can pursue damages and rescission which sets the agreement aside.

Negligent Misrepresentation

The party you enter a contract with owes you a duty to make sure all statements made to induce you to sign a contract are representations of fact. If he/she does not ensure this, then you might be a victim of negligent misrepresentation. You can sue the negligent party for rescission and damages.

Innocent Misrepresentation

This arises if the party you are entering into a contract with makes statements which at the time he/she had reasonable ground to believe were a fact. In innocent misrepresentation, you can get damages but not a rescission. For a watertight case, you need to prove that you suffered some loss from the misrepresentation.

There are numerous challenges which come with running a successful business and fraudsters know it can be overwhelming for you at times. They will hence use all loopholes to defraud your company. Have a commercial lawyer review all your contracts before signing them to protect your interests and give you legal backing in case anything goes wrong.

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