Misrepresentation and Fraud

Misrepresentation is defined, under contract law, as making a false statement to another person or entity that has the effect of inducing the other party into a contract with the party making the statement. Is misrepresentation is proven in a court of law then rescission will take place along with the possible payment of damages, if any were incurred. Rescission is the unmaking of a contract, which means that the one entered into based on a false statement, will be rescinding or negated. For misrepresentation to be present all three elements of the case must be met. The three elements of the case include a false statement having been made, the statement was directed at the party suing, and the statement caused the suing party to enter into a contract.

Presenting Misleading Information

It is illegal, per securities laws, to present misleading information about a company or its securities to an investor or to the public. Anyone can present misleading information, including executives, employees, private investors and financial advisors. There are three forms of fraud, which is a broad category of misrepresentation. The three forms of fraud are fraud, silent fraud, and innocent misrepresentation.


  • The defendant made a representation of one or more facts
  • The representation was false when it was made by the defendant
  • The defendant knew the representation was false when the statement was made or the defendant made it the statement recklessly
  • The defendant made the statement hoping that the plaintiff would rely on that statement
  • The plaintiff relied upon the statement
  • The plaintiff suffered damages as a result of the reliance to the statement

Silent Fraud

  • The defendant failed to disclose a variety of facts about the subject
  • The defendant had actual knowledge of the facts that were not disclosed
  • The plaintiff had a false impression because of the defendant’s failure to disclose the facts
  • The defendant knew the failure to disclose would cause a false impression
  • The defendant intended the plaintiff to rely on the impression when failing to disclose the facts
  • The plaintiff relied on the false impression
  • The plaintiff was damaged as a result of the reliance upon the false impression made by the defendant

Innocent Misrepresentation

  • The defendant made a claim of various facts
  • The claim was made in connection with the making of a contract between the defendant and the plaintiff
  • The claim was false when it was made by the defendant
  • The plaintiff would not have entered into the contract if the defendant had not made the claim
  • The plaintiff suffered a loss because of the contract
  • The plaintiff’s loss benefited the defendant

Legal Help

If you or a loved one has been the victim of misrepresentation, contact a securities law attorney immediately for expert legal counsel regarding your case. An attorney will be able to answer all your questions about misrepresentation, how to file a lawsuit, who to file the lawsuit against and whether or not you will receive compensation for damages incurred.