Misrepresentation means making a wrong statement of fact innocently i.e. without any intention to deceive the other party. In misrepresentation, the party making the statement does not himself know that the statement is false and he honestly believes that it is correct.
Illustration: While selling her watch to Shivam, Shivani tells that the watch is made in Australia. After selling the watch it comes out to the knowledge of the parties that the watch was made in India. Shivani didn’t know it. she honestly believed that the watch was made in Switzerland and she had no intention to deceive Shivam. Hence, Shivani made a misrepresentation.
Section 18 of The Indian Contract Act, 1872 defines term Misrepresentation.
The term “Misrepresentation terms and includes-
(1) the positive assertion, in a way or manner not warranted by the information of the person who’s making it, of that which is not true, though that person believes it to be true
(2) any breach of duty which, without an intention to deceive, gains an advantage of the person committing it, or anyone claiming under such person, by misleading another person to his prejudice, or to the prejudice of anyone claiming under him
(3) causing, however innocently, a party or person to an agreement, to make a mistake as to the substance of the thing which is the subject matter of the said agreement.
Let us explore all the 3 points
1. A positive assertion of fact: In misrepresentation, there is a positive assertion of material fact by one party. he himself doesn’t know the falsity of the statement.
Illustration: Mr Ahirwar say to Mr Dangi that Mr Raj would be the director of the ABC Ltd. Mr Ahirwar obtained this information, not from Mr Raj but from another person Mr Thakur the information proves false. Here Mr Ahirawar made an assertion which was not reliable. He had no intention to deceive Mr Dangi and he believed the information to be true. Hence, Mr Ahirwar made a misrepresentation.
2. Breach of Duty: The party making the statement must be careful while informing the other party. He must have clear evidence of what he is speaking. any such information furnished by the party which earns him an advantage over the other party amounts to misrepresentation.
Illustration: While taking an LIC policy Smriti stated that her age was 25. On this information, LIC issued her a policy. Later on, it was found that Smriti’s age was 30. Based on the given information, LIC charged her lesser premium. Smriti must have furnished her real age.
3. Causing mistake about the subject matter: When one party innocently or unintentionally induces the other person to make a mistake as to the subject matter of the contract, it is also a mistake.
Illustration: Please refer to Derry Vs Peek.