DEFINITION of 'Misrepresentation'

A false statement of fact made by one party which affects the other party's decision in agreeing to a contract. If the misrepresentation is discovered, the contract can be later declared void and the situation remedied if the party who relied on the misrepresented fact files suit. For this reason, it is important to be accurate when disclosing facts relevant to a contract negotiation.

BREAKING DOWN 'Misrepresentation'

Misrepresentation generally applies only to statements of fact, not to opinions or predictions. In some situations, such as where a fiduciary relationship is involved, misrepresentation can occur by omission. That is, misrepresentation may occur where a fiduciary fails to disclose material facts of which he or she has knowledge. A duty also exists to correct any statements of fact which later become known to be untrue. In this case, failure to correct a previous false statement would be misrepresentation.

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