Misrepresentation

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.

RELATED TERMS
  1. Voidable Contract

    A formal agreement between two parties that may be rendered unenforceable ...
  2. Third Party Beneficiary

    A person who will benefit from a contract made between two other ...
  3. Void Contract

    A formal agreement that is illegitimate and unenforceable from ...
  4. Continuous Contract

    A reinsurance contract that does not have a fixed contract end ...
  5. Restatement

    The revision and publication of one or more of a company's previous ...
  6. Securities Act Of 1933

    A federal piece of legislation enacted as a result of the market ...
Related Articles
  1. Personal Finance

    Master The Art Of Negotiation

    Learn the strategies that will help you to come out on top in any negotiation.
  2. Investing

    How Do Futures Contracts Work?

    Futures contracts are one of the most important financial innovations in history, but they are often misunderstood. Find out this contract is used to transfer risk between different parties. ...
  3. Term

    The Difference Between Forwards and Futures

    Both forward and futures contracts allow investors to buy or sell an asset at a specific time and price.
  4. Investing Basics

    What are Financial Statements?

    Financial statements are a picture of a company’s financial health for a given period of time at a given point in time. The statements provide a collection of data about a company’s financial ...
  5. Professionals

    Meeting Your Fiduciary Responsibility

    Being a fiduciary comes with a certain level of responsibility. These four steps will reduce your liability when managing other people's money.
  6. Economics

    What is a Fiduciary?

    A fiduciary is a person who acts on behalf of another person (or people) to manage assets.
  7. Investing

    Look For These Red Flags In The Income Statement

    Companies can overstate their revenues and understate their losses to boost investor confidence. Learn how to spot the these red flags in income statements.
  8. Investing Basics

    Explaining Financial Statement Analysis

    Financial statement analysis is the process of reviewing a company’s statements to gain an understanding of its financial health.
  9. Investing Basics

    12 Things You Need To Know About Financial Statements

    Discover how to keep score of companies to increase your chances of choosing a winner.
  10. Investing Basics

    What are the fiduciary responsibilities of board members?

    Find out what fiduciary duties a board of directors owes to the company and its shareholders, including the duties of care, good faith and loyalty.
RELATED FAQS
  1. How are arm's-length transactions determined by law?

    Determine if transactions are conducted at arm's length by checking if the parties to a contract are independent and transact ... Read Answer >>
  2. Why is fiduciary duty so important?

    Find out why fiduciary duty is so important, including what this legal obligation entails and an example of how it can affect ... Read Answer >>
  3. How can a futures trader exit a position prior to expiration?

    A futures contract is an agreement to buy or sell a commodity at a pre-determined price and quantity at a future date in ... Read Answer >>
  4. What is the difference between forward and futures contracts?

    Fundamentally, forward and futures contracts have the same function: both types of contracts allow people to buy or sell ... Read Answer >>
  5. What is a forward contract against an export?

    Understand forward exchange contracts in exporting, and learn the purpose of using a forward contract and its advantages ... Read Answer >>
  6. What is the difference between a compiled and a certified financial statement?

    All publicly-traded companies are required to provide financial statements, including a balance sheet, cash flow statement ... Read Answer >>
Hot Definitions
  1. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  2. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  3. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  4. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  5. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center