Types of misrepresentation
- Fraudulent misrepresentation – a reckless or deliberately false statement. The importance of being able to prove this is that it gives more options to the innocent party, including to rescind (cancel the contract)
- Negligent misrepresentation – a statement which is shown to have been totally speculative but which is not fraudulent.
- Innocent misrepresentation – where the statement maker can demonstrate reasonable belief that the statement was correct.
Limiting liability for misrepresentation
The position on this depends hugely on whether the contract concerned was :-
- Between 2 businesses
- Between a business and consumer
As a general rule, courts are far less likely to interfere in contracts between 2 businesses and clauses seeking to exclude or limit liability for misrepresentations are more likely to offer protection. With contracts with consumers, there is considerable statutory protection for the consumer and attempts by the business to exclude or limit liability may be wholly counterproductive.
The types of clauses which are commonly found in contracts and which may protect in a business to business scenario are :-
- Clause confirming non-reliance – a clause which states that the parties agree they have not relied on any representation which is not expressly in the agreement.
- Entire agreement clause – whereby the signed contract overrides any prior agreement or negotiation.
- Express exclusion of liability – a statement excluding liability