Misrepresentation of Identity
Businesses can install sophisticated software to verify the authenticity of the people they deal with. In spite of this, firms should remain vigilant so that their credibility is not undermined by security breaches. There is a wealth of information available on a wide range of subjects on the internet. Some of the information, however, may not be reliable. A firm must ensure that the information it uses is accurate and reliable. A failure to perform this can result in embarrassment, diminished reputation, a legal proceeding, or financial loss.
The act of misrepresenting facts is committing a fraud on the other party by making false statements that affect their decision to enter into a contract. An adversely impacted party can seek damages if the misrepresentation is discovered and the contract is declared void. A defendant is accused of making a misrepresentation, while the plaintiff is claiming the misrepresentation.
The term misrepresentation only applies to statements of fact, not to opinions or predictions. Regardless of the size of the transaction, misrepresentation constitutes a contract breach. It is possible for a seller of a car to misrepresent the number of miles to a prospective buyer in a private transaction, leading the prospective buyer to purchase the car. Later, if the buyer discovers that the car had much more wear and tear than described, they can sue the seller.
When a lender considers a misrepresentation to be a default event, such as in a credit agreement, it could be considered an event of default. M&A deals can be terminated for misrepresentations, which may result in a substantial break fee.It is possible to misrepresent by omission in some situations, such as in fiduciary relationships. When a fiduciary fails to disclose material facts about which they are aware, misrepresentation may occur. If any statement of fact is later discovered to be untrue, it is also essential that it be corrected. It would be a misrepresentation if the previous false statement wasn’t corrected.
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