If the representation is included as a term of the contract, the remedy is straightforward, as an action for breach of that contractual provision will usually lie.
If the representation was not included as a term of the contract, but instead existed as a statement made prior to, and separate from, the contract document, the legal rights arising are a little more complicated.
If a false statement is made about a material fact and the purpose of that statement was to induce the other party into entering the contract, then the principal of misrepresentation arises.
The false statement must be about either a past or present fact. Generally speaking, a promise as to future events, a statement of opinion, or a statement of intention is not considered to be a statement of fact and does not constitute a misrepresentation.
Similarly, silence will not normally constitute a misrepresentation without some other special circumstances.
For a misrepresentation to occur it is also necessary to prove that the false statement was calculated to induce the aggrieved party to enter the contract and that the aggrieved party relied on the false statement in so entering the contract.
If a misrepresentation is established, it can be one of either two types; innocent or fraudulent. An innocent misrepresentation occurs where the statement was false, but the party making it did not know it to be so. A fraudulent misrepresentation occurs when the party knew that they were giving incorrect information.
If a person enters into a contract on the basis of an innocent misrepresentation, then a right arises to rescind the contract; that is to get out of the contract as though it had never existed.
If the representation which induced the party to contract was a fraudulent one, then the aggrieved party still has the right to rescind the contract, but the aggrieved party can also seek damages for any loss that they suffered by entering the contract in the first place.
If you have any further enquiries, or would like to discuss any matters of contract law further, feel free to contact Everingham Solomons Solicitors because Helping You is Our Business.
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