Fraud Litigation

Types of Misrepresentation

There are three types of misrepresentation: fraudulent misrepresentation, innocent misrepresentation, and negligent misrepresentation.

What is Fraudulent Misrepresentation?

Fraud, also known as deceit or misrepresentation, is a tort recognized in Canadian Law. Briefly, a tort is judge made law, meaning that it cannot be found in any written law but was created by a judge’s ruling, also known as common law. A fraudulent misrepresentation is a statement that is made by Party A with the knowledge that it is false and with the intent to deceive Party B.

To have a successful claim of fraud, the following elements must be present:

• Party A had knowledge that its statement was false;
• Party A made the statement recklessly or knowing that it was false;
• The statement was relied upon was material or relevant to Party B making a decision to enter into a contract with Party A;
• Party B was induced to enter into a contract with Party A.

It is important to note that in order to recover damages from for a successful claim of fraud, Party B must suffer a loss.

Innocent Misrepresentation (Honest Mistake)

Innocent misrepresentation occurs where Party A, the party who made the statement, reasonably believed that his or her statement was true.

Where there is innocent misrepresentation, Party B, the party who relied on the statement, may be provided a right of rescission, meaning that he or she is not required to perform his or her obligations set out in a contract.

Negligent Misrepresentation (Carelessness)

Negligent misrepresentation occurs when Party A did not take care prior to making his or her statement to ensure that the contents were true. Where a successful claim of negligent misrepresentation is made, Party B may be entitled to money to compensate them for their loss. Similar to fraudulent misrepresentation, the following five elements must be shown for a successful claim of negligent misrepresentation:

1. there was a duty of care between Party A and Party B;
2. the statement was untrue, inaccurate, or misleading;
3. the Party A acted carelessly in making the statement
4. Party B relied on the statement; and,
5. Party B suffered a loss because he or she relied on the statement.

The main difference between fraudulent misrepresentation and negligent misrepresentation is that Party B is not required to show that Party A made the statement with the knowledge that it was false.

How Our Trial Lawyers Can Assist You

Atkinson LLP can assist help you start a lawsuit or defend a claim of fraud. Common areas of fraud include:

• investment fraud;
• internet fraud; and
• real-estate fraud.

Atkinson LLP is located in the heart of the financial district in downtown Toronto. Our legal staff are ready to assist you. Call us at 647 341 1714 or email us at [email protected] for a consultation. Please note that this article is intended for educational purposes only. It contains general information about legal matters and should not be considered legal advice.