Innocent Misrepresentation Laws

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What Is Innocent Misrepresentation?

Misrepresentation in general is a legal term that means "a false statement of fact that has the effect of inducing someone into a contract." For example, telling someone a stereo is "practically new" so that they buy it, when it is in fact 5 years old and heavily used.

Innocent misrepresentation is one of the three recognized varieties of misrepresentations in contract law. Essentially, it is a misrepresentation made by someone who had reasonable grounds for believing that his false statement was true. So in the above example, if the seller didn't know the stereo was actually old, he would only be liable for an innocent misrepresentation.

In the real world, however, it is often the case that because the other two varieties of misrepresentation (negligent and fraudulent) are much more difficult to prove, often this is the best course of action. 

What Constitutes Innocent Misrepresentation? 

It will depend on the law of the state where the misrepresentation occurred. However, there are five basic elements that must be satisfied to prove innocent misrepresentation: 

In addition to those four elements, which are necessary for negligent and fraudulent misrepresentation as well, there is a fifth element that is unique to innocent misrepresentation. 

What Are the Punishments and Remedies for Innocent Misrepresentation?

Misrepresentations are civil offenses, meaning they can only be heard in civil court. The criminal equivalent, which requires a degree of intent, is called "false pretenses." The general remedy in civil court for all types of misrepresentations is rescission. This means the court will act like the transaction or contract never existed, and everyone goes back to the way they were.

Example: Joe sell someone a stereo for $50 telling them that it is fully functional, which Joe thinks is true, and it turns out to be broken. The deal is rescinded; the buyer returns the stereo, and Joe returns the money.

How Can an Attorney Help? 

Dealing with any sort of misrepresentation is a difficult process, precisely because it is very difficult to ascertain whether someone was making an "innocent" mistake, or really attempting to defraud you out of your money. If you have been the victim of a misrepresentation, an experienced business lawyer will be essential in pursuing the case. Each state has its own laws regarding the topic, so a good attorney will know how best to proceed and can explain what kind of remedies you can expect.

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Last Modified: 08-26-2014 10:17 AM PDT

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