How to Claim for Misrepresented Contracts

Entering into a contract in England and Wales is a fundamental part of business and consumer life. A contract can be for goods, services, property, investments or other arrangements. Misrepresentation arises when a false statement of fact made by one party induces another to enter the contract. If you relied on that false statement and suffered loss as a result, you may have legal grounds to pursue remedies including rescission (undoing the contract) and/or compensation (damages). This guide explains what misrepresentation means, your rights and remedies, the legal process for making a claim, time limits, and practical considerations for individuals and businesses.

What Is Misrepresentation?

In contract law, misrepresentation occurs when one party makes a false statement of fact or law before or at the time of entering a contract, and that false statement induces the other party to agree to the contract. Misrepresentation can arise in written terms, verbal communications or conduct, and may relate to key aspects of the deal such as quality, existence, performance or price of goods and services. The misled party must have relied on the false statement when deciding to enter the contract.

Misrepresentation does not generally cover mere opinions or future intentions unless given dishonestly or without reasonable basis. Statements about the present or past that are untrue and relied upon can form the basis of a claim.

Types of Misrepresentation

English law recognises three main categories of misrepresentation, and the remedies available may vary depending on the type:

• Fraudulent Misrepresentation: A knowingly false statement, or a statement made recklessly without caring whether it was true. This is the most serious category and can support rescission and substantial damages.
• Negligent Misrepresentation: A false statement made carelessly or without reasonable grounds for believing it to be true. Under Section 2(1) of the Misrepresentation Act 1967, negligent misrepresentation can attract the same remedies as fraud unless the maker had reasonable grounds for belief in the truth of the statement.
• Innocent Misrepresentation: A false statement made honestly and on reasonable grounds. In these cases, rescission is generally available and the court may award damages in lieu of rescission under Section 2(2) of the Act.

Whether a statement is fraudulent, negligent or innocent depends on the state of mind and conduct of the person making it at the time the statement was made.

Remedies for Misrepresentation

If you can establish that a misrepresentation induced you to enter into a contract, the law provides two principal remedies: rescission and damages.

Rescission (Undoing the Contract)

Rescission is an equitable remedy that sets aside the contract as if it had never been made. Both parties must, as far as possible, restore what they received under the contract. You may be required to return goods, repay money or otherwise unwind the transaction. Rescission aims to restore the parties to the position they were in before the contract.

However, rescission can be refused by the court in certain circumstances:

• If it is impossible to restore both parties to their pre‑contract position (for example, goods have been used or altered).
• If the contract has been affirmed (you knew of the misrepresentation but chose to continue with the contract).
• If a third party's rights intervene (for example, goods sold on to an innocent purchaser).
• If too much time has passed, such that it is inequitable to rescind.

Rescission can be powerful where the misrepresented contract is no longer desirable or commercially viable.

Damages (Financial Compensation)

Damages compensate you for losses caused by the misrepresentation. The type and amount of damages depend on the category of misrepresentation:

• For fraudulent misrepresentation, damages can cover all losses directly flowing from entering the contract, even if they were not foreseeable, as recognised in the tort of deceit.
• For negligent misrepresentation, damages under Section 2(1) of the Misrepresentation Act 1967 are generally assessed similarly to fraudulent misrepresentation.
• For innocent misrepresentation, damages are typically assessed on contractual principles and the court has discretion whether to award them in lieu of rescission.

Damages are designed to put you in the position you would have been in had the contract been entered into without the misrepresentation.

Steps to Make a Misrepresentation Claim

1. Establish the Facts

Collect all relevant documentation and evidence:

• Written and verbal communications leading up to the contract;
• Terms, proposals, brochures or marketing materials;
• Records of reliance on statements made by the other party;
• Proof of loss or financial detriment you suffered.

Clear evidence of reliance on the false statement strengthens your position.

2. Clarify the Type of Misrepresentation

Determine whether the misrepresentation was fraudulent, negligent or innocent. The type affects the remedies available. If the statement was knowingly false or made recklessly, it is likely fraudulent. Statements made without reasonable verification may be negligent. Honest errors with reasonable grounds may be innocent.

3. Consider Rescission and Damages

• Decide whether you want to rescind the contract, claim damages, or seek both. The remedies can overlap.
• For contracts that are no longer commercially viable or desirable, rescission may be most appropriate.
• If losses extend beyond returning money or goods, pursuing damages may be necessary.

4. Notify the Other Party

You will usually begin by sending a formal written notification to the other party setting out:

• The statement you contend was false and how it induced the contract;
• Whether you seek to rescind the contract, damages, or both;
• Timescales for response.

Engaging in early negotiation may sometimes resolve the matter without litigation.

5. Court Proceedings if Necessary

If the other party disputes your claim and negotiations fail, you may need to issue a claim in the County Court (or High Court for higher value claims). In court, you must prove:

• A false representation was made before the contract;
• You relied on that representation in entering the contract;
• You suffered loss as a result.

Claims are usually based on common law and the Misrepresentation Act 1967. Proven misrepresentation can result in rescission and damages.

Time Limits for Claims

In England and Wales, limitation periods govern how long you have to bring a civil claim.

• For contractual and misrepresentation claims, the usual period is six years from the date of the misrepresentation or when loss is suffered. The court may apply a “date of knowledge” rule in fraud cases, meaning the clock starts when you knew or should have known about the misrepresentation and loss.

Delaying action can affect the availability of rescission or damages, especially if the contract has been affirmed or circumstances have changed. Prompt action is advisable.

Practical Considerations and Risks

Entire Agreement and Exclusion Clauses

Contracts often include entire agreement clauses or exclusion terms intended to limit liability for pre‑contractual statements. While these can restrict contractual remedies, they do not automatically prevent a claim for misrepresentation in tort or under statute, particularly for fraudulent misrepresentation. Attempts to exclude liability for fraud are generally ineffective, and excluding negligence is subject to reasonableness tests under the law.

Professional Advice

Complex misrepresentation claims, particularly involving commercial contracts or significant sums, can involve technical legal issues. Obtaining specialist legal advice early can help clarify options, strengthen your case and assist with drafting formal claims.

Common Questions

Can I claim if the false statement was an opinion?
Generally no, unless the opinion was given dishonestly or without reasonable basis, in which case it might be treated as a misrepresentation.

What if I continued with the contract after learning the truth?
Continuing the contract after discovering the misrepresentation may amount to affirmation, which can prevent rescission. Evidence of prompt action is critical to preserve remedies.

Is compensation guaranteed if misrepresentation is proven?
Not always. Compensation depends on the type of misrepresentation and proof of loss. Rescission may be more appropriate in some cases.

Key Takeaways

A misrepresented contract in England and Wales arises where a false statement of fact induces a party to enter an agreement. The law recognises fraudulent, negligent and innocent misrepresentation, with remedies including rescission (undoing the contract) and damages (financial compensation). Making a claim involves gathering evidence, determining the type of misrepresentation, notifying the other party, and, if necessary, pursuing court action. Time limits and contractual clauses can affect your options, so early action and clear documentation are important. Understanding your rights and legal processes helps you make informed decisions if you believe you have entered a contract based on false information.