First Principles of Business Law

6. Misrepresentation

6.1. Obtaining consent by misrepresenting relevant facts

A representation is a statement of apparent fact. If a representation is untrue it is called a ‘misrepresentation’.  Depending on the circumstances, remedies may be available if a transaction has been entered into because of a misrepresentation.

It is important to identify what kind of misrepresentation occurred, based on what the person making the statement knew or intended. This intention is objectively inferred from the known circumstances.

If a misrepresentation is made neither deliberately nor negligently, but innocently, then the common law does not allow a transaction induced by that representation to be set aside as void,  Furthermore, no action would exist in tort or contract law for damages. However, s 18 of the Australian Consumer Law provides relief in these circumstances - see the module 'The regulation of undesirable business practices'.

If the misrepresentation was either deliberate or negligent, a transaction induced by that misrepresentation may be voidable at the request of the innocent party.