This guide is maintained as a current resource for September 2026 and covers only the laws of England and Wales. Information is for general guidance, not legal advice. Consult a qualified solicitor for advice specific to your situation.
Learn what negligent misrepresentation is under English and Welsh contract law, how the Misrepresentation Act 1967 defines and treats negligent statements, the legal tests for establishing a claim, and the remedies of rescission and damages available when losses arise from careless false statements.
When entering into a contract, people often rely on statements made by the other party about goods, services, pricing, performance or other material facts. If those statements are false and made carelessly - without reasonable grounds for believing them true - the law may allow the affected party to claim for negligent misrepresentation. This article explains what negligent misrepresentation means under English and Welsh law, how it is established, the remedies available such as rescission and damages, common practical scenarios, and important limitations claimants and businesses should understand.
What Is Misrepresentation in Contract Law?
A misrepresentation is a false statement of fact or law made to another party before a contract is formed that induces the other party to enter the contract. It must be more than an opinion or vague assertion of future intent; it must be a representation that materially influences the decision to contract.
Under the Misrepresentation Act 1967, misrepresentation is categorised into three types: fraudulent, negligent and innocent. Claims depend on what type of misrepresentation occurred rather than merely whether it was false.
What Is Negligent Misrepresentation?
Negligent misrepresentation arises when a false statement of fact is made carelessly or without reasonable grounds for believing it to be true, and another party relies on that statement to enter a contract, suffering loss as a result.
Unlike fraudulent misrepresentation (where the representor knows the statement is false or is reckless as to its truth), negligent misrepresentation focuses on carelessness or lack of reasonable belief. Courts treat this as more culpable than innocent misrepresentation but less so than deliberate deceit.
In practical terms, a trader who quotes inaccurate performance figures they did not verify, or repeats claims from a supplier without checking them, could potentially be liable for negligent misrepresentation if that information induced a contractual decision.
The Legal Basis: Misrepresentation Act 1967
The Misrepresentation Act 1967 governs much of the law on negligent misrepresentation in England and Wales. Specifically:
- Section 2(1) creates a statutory cause of action: if a false pre‑contractual statement causes loss, the person who made it is liable for damages as if the statement were made fraudulently, unless they can show they had reasonable grounds to believe the statement was true up to the point the contract was made.
- This effectively shifts the burden of proof to the representor: once the claimant shows a false statement induced the contract, it is for the representor to prove reasonable grounds for belief.
The Act replaced the previous common law position in which damages were largely available only for fraudulent misrepresentation, and introduced statutory liability for negligent statements.
Distinction from Common Law Negligent Misstatement
There is a separate concept at common law known as negligent misstatement, which arises under the general law of negligence (for example, as recognised in Hedley Byrne & Co Ltd v Heller & Partners Ltd). That tort allows claims for careless statements causing economic loss in certain relationships where a duty of care exists.
However, for most contractual claims, the statutory cause of action under the Misrepresentation Act is more commonly used because it does not require establishing the same duty‑of‑care threshold as the separate tort.
Establishing a Claim for Negligent Misrepresentation
To make out a claim under section 2(1) of the Misrepresentation Act:
- False Statement of Fact or Law – There must be a false representation made before contracting.
- Inducement – The claimant entered the contract because they relied on that statement.
- Loss – The claimant suffered financial loss as a result of entering the contract.
- Lack of Reasonable Grounds – Unless the representor proves they had reasonable grounds to believe the statement was true, they will be liable for the loss caused.
If these elements are established, the claimant generally has the right to remedies similar to those available for fraudulent misrepresentation.
Remedies: Rescission and Damages
Rescission
Rescission restores both parties to the position they were in before the contract. This equitable remedy unwinds the contract and typically requires returning money, goods or other benefits exchanged. Rescission is often available for negligent misrepresentation if the contract has been induced by the false statement.
However, rescission can be barred in situations such as:
- The claimant has affirmed the contract (continued to act as though it still stands after discovering the misrepresentation).
- It is impossible to restore both parties to their original positions (for example, goods have been consumed or cannot be returned).
- Third‑party rights have intervened.
Damages
Under section 2(1) of the Act, the claimant can seek damages in respect of the loss suffered. The measure of damages is treated as though the misrepresentation was fraudulent unless the representor proves they had reasonable grounds to believe the statement was true. This can result in a wide scope of compensable losses.
In addition to statutory damages, claimants may also seek damages under the common law tort of negligent misstatement where appropriate, though this requires a separate duty‑of‑care assessment.
Practical Examples
Commercial Supply Scenario
A small business enters a supply contract after the supplier asserts that a critical component meets certain regulatory standards. If the supplier did not verify compliance and those claims prove false, causing business loss, the business may claim negligent misrepresentation if they relied on the statement in deciding to contract.
Consumer Transaction
A consumer is told a second‑hand car has had a recent engine rebuild with specific performance characteristics. If the dealer did not have reasonable evidence of this and the consumer proceeded to buy the car and later suffered financial loss, a claim for negligent misrepresentation might arise.
Limitations and Important Considerations
Timing and Conduct
A claimant must act promptly upon discovering a misrepresentation. Delay, or continuing to perform the contract after learning of the false statement, can be construed as affirmation of the contract and may bar rescission.
Exclusion Clauses
Attempts to exclude liability for misrepresentation in contracts may be limited by statute, particularly where such terms are unreasonable under the Unfair Contract Terms Act 1977.
Consumer Protection Regulations
In some consumer contexts, alternative statutory rights under consumer protection regulations (for example, against unfair commercial practices) may offer supplementary routes for redress, though they do not replace misrepresentation law.
Key Takeaways
Negligent misrepresentation is a key concept in English and Welsh contract law, arising where a false pre‑contractual statement is made carelessly or without reasonable grounds for belief, and induces another party to contract. The Misrepresentation Act 1967 enables claimants to seek rescission and damages under section 2(1), shifting the burden of proof to the representor to justify their belief in the statement's truth. Remedies aim to address loss fairly, but are subject to equitable limits such as affirmation and restitution difficulties. Understanding these principles is essential for consumers and businesses involved in contractual negotiations and disputes.
