Fraud by Misrepresentation - Making a Civil Claim

What is misrepresentation?

Misrepresentation occurs when one party makes a false statement of fact that induces another party to enter into a contract. In English law, there are three types of misrepresentation: innocent, negligent, and fraudulent.

Innocent misrepresentation happens when the party making the statement genuinely believes it to be true, negligent misrepresentation occurs when a party fails to take reasonable care to ensure the statement’s accuracy, and fraudulent misrepresentation involves deliberate deception.

The legal consequences can include rescission of the contract, where the parties are returned to their pre-contract position, and, in some cases, damages for any losses suffered.

Misrepresentation undermines the integrity of the contractual relationship by leading to decisions based on false information.

What is fraud by misrepresentation?

Fraud by misrepresentation is defined as a criminal offense whereby an individual makes a false statement or representation with the intent to deceive another person. As result, the misrepresentation causes that person to suffer a financial loss or gain some financial advantage. This offense is primarily governed by the Fraud Act 2006.

According to Section 2 (2), “false” refers to a statement, express or implied, including a representation as to the state of mind of the person making the representation, that is untrue or inaccurate. Section 2 (3) defines a “representation” as any representation as to fact or law, including statements about the intentions or beliefs of the person making the statement or anyone else.

The key elements of fraud by false representation include:

• False Representation: The accused must make a false representation, either by words or conduct, conveying information that is untrue.
• Intent to Deceive: The individual making the false representation must do so with the intent to deceive someone else.
• Causation of Loss: The false representation must cause the victim to suffer a financial gain or loss, or risk of loss for the perpetrator.

Fraud by misrepresentation is a serious offense and can result in criminal prosecution. The penalties for conviction can include a maximum sentence of 10 years imprisonment, fines, or both, depending on the severity of the offense.

In addition to potential criminal liability, a person who has been a victim of fraud by misrepresentation in England and Wales can also pursue a civil claim for damages. While criminal cases are brought by the state (Crown Prosecution Service) against the alleged offender, civil claims are typically initiated by the individual who suffered harm as a result of the fraudulent misrepresentation.

Making a civil claim for fraud by misrepresentation

Making a claim for fraud by misrepresentation involves proving that one party intentionally made an untrue or misleading statement, with the intention of inducing the other party to enter into a contract.

To succeed in such a claim, the claimant must demonstrate that they relied on the false statement when deciding to enter into the contract and suffered losses as a result. The person making the representation must have known the statement was false or acted recklessly, without regard for its truth.

Remedies for fraud by misrepresentation typically include rescission of the contract and the possibility of claiming damages for any losses incurred. Unlike other forms of misrepresentation, damages in fraud cases may cover all direct and indirect losses caused by the fraudulent misrepresentation.

Defences to fraud by misrepresentation

There are several defences a party may raise in response to a claim of fraud by misrepresentation:

Truth of the statement:

The defendant can argue that the statement was, in fact, true or substantially correct, which would negate the claim of misrepresentation.

Lack of reliance:

If the claimant did not rely on the misrepresentation when entering into the contract, the defence can argue that the false statement had no impact on the decision to contract. For example, if the claimant was aware of the true facts before entering into the agreement, reliance cannot be proven.

No Inducement:

The defendant may argue that the misrepresentation did not induce the claimant to enter into the contract, meaning the false statement was not the reason the claimant took the action they did.

Opinion or Puffery:

If the statement in question was merely an opinion or sales talk (puffery) rather than a factual assertion, this could be a valid defence. A claim for fraud by misrepresentation requires a false statement of fact, not just an exaggerated opinion.

Contributory Negligence:

In some cases, the defendant may argue that the claimant contributed to their own losses by failing to conduct proper due diligence or by acting unreasonably in relying on the statement.

How our panel of solicitors can assist

If you wish to make a claim for fraud by misrepresentation, it is important to seek legal advice. We have a panel of solicitors who have dealt with a wide range cases involving fraud by misrepresentation. They provide legal advice and representation to individuals, businesses, and organisations that have been the victims of fraud, as well as to those who have been accused of committing fraud.

Please note, we are not a firm of solicitors. We act as an introducer and will pass on your case to a solicitor on our panel. Panel firms pay fees which contribute to the running of our website and marketing. We will never charge you for passing on your case.

All of our solicitor firms are authorised and regulated by the Solicitors Regulation Authority (SRA).

Our solicitors also help with commercial claims, such as partnership disputes, breach of contract and CCJ removal.