Fraudulent Misrepresentation

Before a decision is made to enter into a contact, whether it be an investment into assets such as property, shares or a service, it is likely the party selling will make representations about what they are selling.

On occasion one party will get financial credit because they make representations about their financial status.

However, the party on the other side of the transaction (typically the purchasing party) considers after the event that they have been duped in some way.

Where, for example a selling party, makes a representation to a purchasing party and the selling party knows what they have said is false, does not believe what they have said or ‘reckless’ as to whether what they represented was true or not, this can lead to a claim in misrepresentation.

If the seller intended for the purchaser to rely on the represented fact and the purchaser did so when making their decision to purchase, the purchaser has the right to bring a claim in fraudulent misrepresentation.

That is not always the case, they may have just made a bad commercial decision, for example, not carrying out their due diligence. However, there are several case examples where one party may have deceived the other so to make the ‘sale’.

Often fraudulent misrepresentation is used in claims where there is no contractual claim available, there is a limit on liability of the selling party or what is known as an ‘entire agreement clause’ in a contract that stops a purchasing party from makings claims for incorrect representations of fact about the sale unless they were written into a contract.

Knowing when it may be sensible or an option to bring a claim in fraudulent misrepresentation is not simple but we have experience in advising clients on these claims.

These claims also focus on the individual wrongdoer, so for example, if a company was making the sale which was misleading, but one of their directors made the false representations, it is that director that may be personally liable as well as the company.  This is known as ‘piercing the corporate veil’.

Understanding this area of law comes from experience and we have experience in managing several claims in fraudulent misrepresentation which have led to successful outcomes.

This includes property purchases, acquisition of businesses (via share purchase agreements) and being duped through misrepresentations to enter into contracts which did not need to be entered into.

Key is proving what has been represented and then assessing your case from that initial starting point.

If you consider your business, organisation or yourself have been the deceived when entering into a transaction, of whatever nature, we have the experience to help.

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