Misrepresentation 

A misrepresentation is a false statement of fact made by one party that induces the other to enter the contract. Unlike a term, it is not promised — the remedy lies in rescission and, depending on the state of mind of the maker, damages.

In Australian practice this doctrine is often overshadowed by the statutory prohibition on misleading or deceptive conduct, which requires no proof of fault. Address both.

The elements

1. A false statement of fact. Statements of opinion, intention or law are generally excluded — but an opinion implies that the maker holds it and has a reasonable basis for it, and a statement of intention is false if the intention was never held. Silence is generally not a representation, subject to important exceptions: a half-truth, a statement rendered false by later events, and contracts of the utmost good faith.
2. Addressed to the representee.
3. Inducement. The representee must have been influenced by it. It need not be the only reason, but a representee who did not know of the statement, or who relied entirely on their own investigation, has not been induced. This does not mean a representee who merely had the opportunity to verify the statement is deprived of a remedy: in Redgrave v Hurd (1881) 20 Ch D 1,¹ a purchaser was entitled to rescind despite having had the chance to check the vendor's books and discover the falsity of the representation, because he was not obliged to use that opportunity.

Categories and remedies

• Fraudulent — made knowingly, without belief in its truth, or recklessly. Rescission, and damages in the tort of deceit measured to restore the plaintiff to their pre-contract position, including consequential loss.
• Negligent — made carelessly where a duty of care exists. Rescission, and damages in negligence.
• Innocent — neither fraudulent nor negligent. Rescission, with an indemnity for obligations necessarily created by the contract, but no damages at common law.

Legislation in some jurisdictions modifies these positions; check the applicable Act.

Rescission and its limits

Rescission restores the parties to their pre-contract positions. It is lost where:

• the representee affirms the contract with knowledge of the misrepresentation;
• there is excessive delay;
• restitution is impossible — the parties cannot substantially be restored; or
• third-party rights have intervened.

An entire agreement clause may limit reliance on pre-contractual statements as terms, but does not defeat the statutory misleading conduct provisions.

Applying this in a problem question

1. Isolate the statement and ask whether it is fact, opinion, intention or law.
2. Address silence carefully — identify which exception applies if you rely on it.
3. Establish inducement on the facts, not by assertion.
4. Categorise the misrepresentation and match the remedy.
5. Check the bars to rescission.
6. Run the statutory misleading conduct claim in parallel; it is usually easier to make out.

Where the authority sits

Common law and equity, modified by statute in some jurisdictions, and substantially overlapped by Commonwealth consumer legislation. Identify which body of law you are applying.