Representation denotes dissimilar things in different contexts. For instance, representation means acting in place of or standing for another party through endorsement or lawful privilege. At the same time, one may describe representation as a declaration or contention made by one party to a different one. This may have been done or may happen ahead of or during an agreement vis-à-vis certain prevalent reality, subject or situation that may influence the deal or its articles. Thus, misrepresentation may be defined as a falsified declaration of truth. It also means deceitful, neglectful or guiltless fabrication or an incomplete declaration of the truth. If a definite falsification provokes the other party to sign an agreement, that party may have the authorized privilege to annul the deal or ask for payment for the damages.
It must be mentioned here that differentiating between a true representation and a simple case of overstatement or declaration of purpose or view may be often problematic. For instance, a statement such as 'This is the most excellent contract in town' may be considered as a hyperbole or overstatement that may not, in effect, lead to a suit involving legal privilege, but it may certainly be considered as fake or deceiving as far as the Competition Act is concerned. In simpler words, if any one makes an explicit declaration regarding the specific sort of use of a particular property, it would be considered as a representation. On the contrary, if the statement is established as bogus, it would be deemed as a misrepresentation.
In fact, misrepresentation is considered to be a very confusing part of law. And hence, the law categorizes misrepresentation in three segments - guiltless (innocent), deceitful (fraudulent) and negligent (careless).
Innocent misrepresentation of fact means an individual or a party issuing a statement regarding a prevailing reality that is incorrect, but the individual or the party considers it to be correct. In such a situation, the other party who is a prey of the falsification is persuaded to enter into an agreement, he or she is free to reject the agreement, make an endeavor to set is out-of-the-way or get back whatever he or she has spent or handed over as per the contract relying on the false information. The other party is also entitled to initiate any action, including legal proceedings, to protect him or her in accordance with the agreement signed. Nevertheless, normally, the other party is not entitled to regain the fiscal and other harms suffered by him or her owing to the falsification if it is established to be innocent.
Basically, a fraudulent misrepresentation comprises three primary aspects. First, the party making the false statement or misrepresentation is conscious that his or her statement is fraudulent or has deliberate disrespect for truth. Second, the objective for making the fraudulent misrepresentation must have been to pursue another party to enter into an agreement. Third, the misrepresentation must have led the other party to enter an agreement resulting to a loss.
In the event of such a deceit owing to a fraudulent misrepresentation, the party that has suffered a loss by entering a contract on the basis of the false statement has the right to oppose the implementation of the agreement and also enjoys the privilege to claim compensation for the losses suffered owing to the fraud.
It may be mentioned here that even the key person of a business is also legally responsible for any falsification by his or her agent provided it is done with direct or oblique power. The power or authority will be considered as implied when the falsification or misrepresentation is done during as well as within the authority of the duties of the agent, for instance while presenting a property to the second party with the objective of a business deal.
Even the owners of the real estate are accountable for the statements made regarding an asset by a broker or sales representative. When a broker or sales representative makes a fraudulent misrepresentation regarding the property, the above two persons as well as the principal whom the broker or salesperson is representing will be legally responsible for paying compensation to the party suffering losses by entering a contract at their behest. This is owing to the fact that though a sales representative concurs with the seller of the property, but fails to reveal relevant information related to the seepage. As a result, the selling brokerage firm as well as the salesperson may be held accountable for the losses suffered by the other party, in this case the buyer.
In the event of any association between the two parties concerned in a deal and the selling party makes a misrepresentation carelessly or neglectfully, the individual who is responsible for providing misinform will be liable for legal measures for the compensation to be paid to the party that suffered acting on the falsification. The suffering party is entitled to make a claim for the losses suffered by it only when it is proved that the other party made the misrepresentation with the purpose that the former party would depend on the information and the party did rely on the data. Such a situation is common when a real estate property buyer had depended on the misrepresentation made by a salesperson representing the seller regarding the financial declarations of the seller's dealings and entered into a contract with the seller vis-à-vis the asset.
Apart from this, representatives of property sellers have also been held accountable for neglectful misrepresentation regarding the magnitude of a real estate involved in a deal as well as the failure to substantiate information in a record and offering unfair account of the expense incurred by the ownership of the property being well aware that the buyer has been depending on him or her knowledge and recommendations for purchasing the property. In addition, it is also considered as a neglectful misrepresentation when a salesperson or the seller makes a declaration that a specific property may be used in a particular manner, knowing very well that the practice may be completely illegal according to the statutes of the local municipality. Even real estate evaluators have been held responsible for their erroneous reports that formed the basis for lenders to offer mortgage credits. Thus, this demonstrates that one needs to be honest as well as cautious while making a representation regarding a real estate property to another party.