Types of misrepresentation mistakes. - SS2 Commerce Lesson Note

In the context of contract law, misrepresentation refers to a false statement of fact made by one party to another, which induces the other party to enter into a contract. Mistakes, on the other hand, are errors or misunderstandings that occur during the formation of a contract. 

Innocent Misrepresentation:

Innocent misrepresentation occurs when a party makes a false statement honestly, without any intention to deceive or mislead the other party. It is a mistake made in good faith, where the party providing the false information genuinely believes it to be true. Although innocent, the misrepresentation can still render the contract voidable, allowing the innocent party to seek remedies or cancel the contract if they relied on the false statement.

Negligent Misrepresentation:

Negligent misrepresentation happens when a party makes a false statement, but they do so without exercising reasonable care or without verifying the accuracy of the information provided. It is a mistake resulting from the party's negligence in ensuring the truthfulness of their statements. The innocent party can seek damages or rescission of the contract if they can prove that they suffered harm due to the negligent misrepresentation.

Fraudulent Misrepresentation:

Fraudulent misrepresentation occurs when a party deliberately makes a false statement with the intention to deceive or mislead the other party. It involves a deliberate act of deceit, where the party knows that the statement is false or recklessly disregards the truth. Fraudulent misrepresentation is considered a serious offense and can lead to the contract being voidable, with the innocent party having the right to seek remedies and damages for the deceit.

Mistakes, in contrast to misrepresentations, are errors or misunderstandings that occur during the contract formation process. Mistakes can be categorized into two types:

Mutual Mistake:

A mutual mistake refers to a situation where both parties to a contract share a common misunderstanding or belief about an important aspect of the contract. This mistake can render the contract voidable if the mistake relates to a fundamental term of the contract and if it can be shown that the parties would not have entered into the contract had they known the true state of affairs.

Unilateral Mistake:

An unilateral mistake occurs when only one party is mistaken about a material fact related to the contract. In most cases, a unilateral mistake does not provide a basis for rescinding or canceling the contract, as the law generally places the burden on the mistaken party to ensure they are entering into agreements with due care and attention. However, there may be exceptions, such as when the other party knew or should have known about the mistake and unfairly took advantage of it.