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 means in contract law in England and Wales. This comprehensive guide explains statutory tests under the Misrepresentation Act 1967, how negligent misrepresentation differs from other types, the remedies available including rescission and damages, and practical considerations for commercial disputes.
In commercial and contractual relationships, parties often rely on statements made by the other side before agreeing terms. When those statements prove to be false or misleading, and the contract was induced by them, the law recognises misrepresentation. One important category is negligent misrepresentation, which captures situations where false statements are made carelessly or without reasonable grounds for believing they are true. This article explains negligent misrepresentation in clear terms, examines the legal framework in England and Wales, and outlines rights, processes, remedies, limitations, and common practical questions.
What Is Negligent Misrepresentation?
A misrepresentation is a false statement of fact or law made by one party to another that induces the other party to enter into a contract. Misrepresentation may be fraudulent, negligent or innocent. Negligent misrepresentation occurs where a false statement is made carelessly or without reasonable grounds for believing it to be true. Under the Misrepresentation Act 1967, a negligent misrepresentation claim allows a contract to be rescinded (cancelled) and enables a claim for damages (compensation) where losses have arisen due to reliance on the inaccurate statement.
Negligent misrepresentation is distinct from a fraudulent misrepresentation, which involves deliberate dishonesty, and innocent misrepresentation, where the maker genuinely believed the statement was true.
Legal Basis: Misrepresentation Act 1967
The law governing negligent misrepresentation in commercial contracts is principally set out in section 2(1) of the Misrepresentation Act 1967. This statutory provision enables a representee (the party misled) to claim damages where the representor cannot prove they had reasonable grounds to believe the statement was true and did believe it at the time the contract was made. Under the Act, negligent misrepresentation is treated as if it were fraudulent for the purpose of awarding damages, meaning losses arising directly from the misrepresentation can be recoverable.
This statutory route exists in addition to any common law claims for misrepresentation or negligent misstatement, which have overlapping but distinct rules.
How Negligent Misrepresentation Arises
Negligent misrepresentation typically involves:
- A false statement of fact or law made before a contract is entered into;
- The representor making the statement carelessly or without reasonable grounds to believe it was true;
- The misled party relying on that statement when entering the contract; and
- That reliance causing loss or damage.
Unlike fraudulent misrepresentation, negligent misrepresentation does not require proof of dishonesty or an intention to deceive. The focus is on the representor's lack of reasonable basis for the statement.
Negligent Misrepresentation vs Negligent Misstatement
The law makes an important distinction between:
- Negligent misrepresentation under the Misrepresentation Act 1967 - affecting contractual inducement; and
- Negligent misstatement at common law - a form of negligence claim, often arising in advice contexts, requiring a “special relationship” where the defendant owes a duty of care.
The statutory negligent misrepresentation claim under the Act does not require a special relationship and applies directly to pre‑contract statements made by one contracting party to another.
Remedies for Negligent Misrepresentation
Rescission
A claimant can seek rescission, which effectively unwinds the contract and restores both parties, insofar as possible, to their positions before the contract was made. Rescission aims to “undo” the contract where the misrepresentation induced agreement.
Rescission may be unavailable if:
- The claimant has affirmed the contract after discovering the misrepresentation (for example by continuing to perform);
- There has been undue delay before seeking remedy;
- Restitution (restoring parties to prior state) is not feasible; or
- A third party's rights have intervened.
Damages (Compensation)
Under section 2(1) of the Misrepresentation Act, negligent misrepresentation entitles the claimant to damages aimed at compensating losses suffered as a result of entering the contract. Courts assess damages as if the misrepresentation were fraudulent, meaning the claimant can recover losses that flowed directly from the misrepresentation, even if those losses might not have been foreseeable under ordinary negligence principles.
This treatment is more favourable to claimants than common law negligent misstatement damages because the statutory rule equates negligent misrepresentation with fraudulent misrepresentation for compensation purposes, though this position has been subject to academic debate.
Practical Issues and Considerations
Burden of Proof
Once a claimant has shown that a false pre‑contractual statement was made, the burden shifts to the defendant under section 2(1) of the Misrepresentation Act to prove they had reasonable grounds to believe the statement was true and did in fact believe it.
Commercial Reliance
In commercial contexts, reliance is often presumed when the statement has a clear causal connection to the decision to contract. Claimants should document evidence of reliance and loss, such as emails, quotations, or financial projections. Practical documentation reduces disputes about whether the misrepresentation influenced the decision to contract.
Time Limits and Remedy Bars
Negligent misrepresentation claims are subject to limitation periods under the Limitation Act 1980 - typically six years from the date of loss - unless equitable bars such as affirmation or delay apply to rescission claims. Identifying issues early helps preserve rights and supports quicker resolution in tribunals or courts.
Common Questions About Negligent Misrepresentation
Does every false statement amount to negligent misrepresentation?
No. Negligent misrepresentation arises only where the false statement lacked reasonable grounds for belief. Statements made honestly and based on reasonable inquiry may fall into innocent misrepresentation rather than negligent misrepresentation.
Can I claim both rescission and damages?
In negligent misrepresentation cases, claimants may seek rescission or damages. Courts can award damages even if rescission would be impractical, especially under section 2(2) of the Misrepresentation Act as an alternative where rescission might be inequitable.
How does negligent misrepresentation differ from breach of contract?
Negligent misrepresentation arises from pre‑contract statements that induced agreement. By contrast, breach of contract relates to failure to perform contractual duties after formation. Remedies and legal tests differ accordingly.
Key Takeaways
Negligent misrepresentation in England and Wales arises when a false statement is made carelessly or without reasonable grounds for believing it is true and that statement induces the other party to enter a contract. Claims are principally governed by section 2(1) of the Misrepresentation Act 1967, which allows rescission of the contract and damages on a basis similar to fraudulent misrepresentation. Key legal tests include proving the existence of a false statement, reliance on that statement, and resultant loss. Remedial options include unwinding the contract and compensation for losses directly flowing from the misrepresentation. Understanding the legal framework and maintaining thorough documentation are crucial for businesses and individuals facing negligent misrepresentation issues in commercial contracts.
