In both business and personal transactions, honesty is always a guiding value. When there is an intent to make false information to lead another into wrong information, hence causing harm, it is Intentional Misrepresentation. Equally known as fraudulent misrepresentation, this fraud can lead to great financial damage, loss of reputation, and legal conflicts.
In this article, you will learn about intentional misrepresentation, which includes a definition, the elements required to prove it, common examples, defenses, and types of damages that you might be entitled to recover. It helps you know your rights to protect yourself against fraudulent behavior and act if you are a victim.
What Is Intentional Misrepresentation?
Intentional Misrepresentation is a type of fraud where one party knowingly makes a false statement with the intent to deceive another party, leading to financial or other forms of harm. This can occur in various situations, such as business transactions, real estate deals, insurance claims, investment opportunities, and more. It is distinguished from other types of misrepresentation because it requires a deliberate intent to deceive.
Key Elements of Intentional Misrepresentation
To successfully prove a claim of Intentional Misrepresentation, the plaintiff must establish the following elements:
A False Statement of Fact
The defendant must have made a false statement about a material fact. A material fact is one that is significant enough to influence the decision of the other party. This false statement can be made orally, in writing, or through misleading actions, such as providing false documents.
Knowledge of Falsity
The defendant must have known that the statement was false when they made it. This is known as scienter, which means the defendant acted with a fraudulent intent. It is not enough for the statement to be false—there must be evidence that the defendant was aware of its falsehood.
Intent to Deceive
The defendant must have made the false statement with the specific purpose of deceiving the plaintiff. This means they wanted the plaintiff to rely on the false information. The intent to deceive is a crucial element that separates intentional misrepresentation from other types of misrepresentation.
Justifiable Reliance by the Plaintiff
The plaintiff must have reasonably relied on the false statement when making a decision. If the plaintiff knew or should have known that the statement was false, they may not be able to claim reliance. For example, if the false statement was an obvious exaggeration, the court may find that reliance was not justified.
Resulting Damages
The plaintiff must have suffered actual damages as a direct result of their reliance on the false statement. These damages can include financial losses, emotional distress, reputational harm, or other forms of measurable harm.
Common Examples of Intentional Misrepresentation
Here are some common examples of Intentional Misrepresentation:
Real Estate Fraud
A seller falsely claims that a property has never had water damage, even though they are aware of past flooding issues. The buyer relies on this statement and later discovers extensive water damage after purchasing the property.
Business Fraud
A company falsely claims that it has exclusive rights to a patented technology in order to secure a partnership with another business. After investing money and resources, the partner discovers that the technology is not protected by any patent.
Investment Scams
An individual falsely promises guaranteed returns on an investment opportunity, knowing that the investment is high-risk. The investor, relying on this false promise, invests a significant amount of money and loses it.
Fake Professional Credentials
A contractor claims to be licensed and certified, but they are not. A client hires the contractor based on these false credentials, leading to substandard work and financial losses.
Insurance Fraud
An insurance agent convinces a customer to buy a policy by falsely claiming that it covers specific risks when, in reality, it does not. The customer later suffers a loss that is not covered, resulting in financial harm.
How to Prove Intentional Misrepresentation
Proving Intentional Misrepresentation can be challenging, as it requires clear evidence of fraudulent intent. Plaintiffs must carefully gather evidence to establish each element of their claim.
Evidence Used in Intentional Misrepresentation Cases
- Written Communications: Emails, text messages, advertisements, or any written statements containing false information.
- Contracts and Agreements: Documents where the false statements were made.
- Witness Testimony: Statements from individuals who heard the false statement or witnessed the fraudulent conduct.
- Expert Testimony: Professionals who can testify about the falsity of the statement or the extent of the damages.
- Financial Records: Evidence of financial losses resulting from reliance on the false statement.
Steps to Take if You Suspect Fraud
- Document all communications with the other party.
- Preserve any documents, emails, or text messages that support your claim.
- Avoid further reliance on the false information once you become aware of it.
- Contact an experienced attorney to evaluate your case.
Defenses Against Intentional Misrepresentation Claims
Defendants in Intentional Misrepresentation cases can use several defenses, including:
Truth of the Statement
If the defendant can prove that the statement was true, there can be no claim of misrepresentation. For example, if the defendant can show that a claimed product feature is accurate, the claim may fail.
Lack of Intent
The defendant may argue that they did not knowingly make a false statement. If they genuinely believed the statement to be true, it may be considered an honest mistake rather than fraud.
No Reasonable Reliance
The defendant may claim that the plaintiff should not have reasonably relied on the statement. This is often argued if the false statement was obviously exaggerated or contradicted by other information available to the plaintiff.
No Damages
If the plaintiff cannot prove that they suffered any actual harm as a result of the false statement, their claim may fail. For example, if the plaintiff discovered the falsehood before taking any action, they may not have suffered damages.
Types of Damages in Intentional Misrepresentation Cases
Victims of Intentional Misrepresentation may be entitled to recover several types of damages, including:
Compensatory Damages
These are intended to reimburse the plaintiff for financial losses directly caused by the fraud. This can include out-of-pocket expenses, lost profits, and other direct financial losses.
Consequential Damages
These cover additional losses that were a foreseeable result of the misrepresentation, such as lost business opportunities or reputational harm.
Punitive Damages
In cases of severe or malicious fraud, the court may award punitive damages to punish the defendant and deter similar conduct in the future.
Emotional Distress Damages
If the fraud caused significant emotional distress, the plaintiff may be able to recover damages for this harm.
Real-World Case Study
In a real estate transaction, a seller falsely claims that a home has never had termite damage, even though they are aware of severe termite infestations in the past. The buyer, relying on this statement, purchases the home.
After moving in, the buyer discovers extensive termite damage that requires costly repairs. The buyer sues the seller for Intentional Misrepresentation, presenting evidence of the seller’s knowledge of the infestation. The court rules in favor of the buyer, awarding damages for repair costs, diminished property value, and emotional distress.
How to Protect Yourself from Intentional Misrepresentation
Whether you are buying a product, investing in a business, or entering into a contract, there are steps you can take to protect yourself from intentional misrepresentation:
- Get everything in writing, including any important statements or promises.
- Conduct independent research to verify claims made by the other party.
- Ask for documentation to support any important claims, such as certifications or inspection reports.
- Consult an attorney before signing contracts or making large investments.
- Be cautious of statements that seem too good to be true.
How an Attorney Can Help
If you believe you have been a victim of Intentional Misrepresentation, an experienced attorney can help you by:
- Evaluating the strength of your claim.
- Gathering evidence to support your case.
- Negotiating a fair settlement with the responsible party.
- Representing you in court if necessary.
About the Author
Neil Bhartia
Neil Bhartia isn’t your typical, stuffy attorney that you see on TV. While some have their sights exclusively on money and treat their clients like a number, Neil takes a personal interest in every single client he has. As an empath, Neil understands that people that seek legal help are typically in an involuntary, and stressful situation, and he goes out of his way to diffuse the stress and educate clients on each every detail of the legal process.
