Fraudulent misrepresentation

A fraudulent misrepresentation is a false statement knowingly made with the intent to induce a subject to enter into a contract. It is not a term of the contract, and therefore cannot be actioned as a breach. Where a party has entered into a contract as a result of reliance on a fraudulent misrepresentation, there is relief and remedies available.

The court will evaluate fraudulent misrepresentations based on an objective approach (reasonable person test). The elements of misrepresentation are:

1. The misrepresentation must have been relied on when entering into the contract
2. The misrepresentation must be a statement of fact
   • Statements of opinion can and often do involve statements of fact (Smith v Land & House Property Corp)
   • Statements of future intention may involve statement of fact (Edgington v Fitzmaurice)
   • Statements in law also apply – the distinction between fact and law has been abolished
3. The misrepresentation must be positive
   • A statement and not silence
   • Exceptions arise where there is a duty of disclosure

The remedies available for fraudulent misrepresentation are rescission of the contract or damages. If the misrepresentation occurred in the context of a business transaction, a plaintiff may action it under section 18 of the Competition and Consumer Act 2010 (Cth) Schedule 2. This avenue allows for higher damages.