Key Takeaways
- Fraudulent misrepresentation is a false statement made knowingly, without belief in its truth or recklessly, that persuades someone to enter a contract, and in law it is the tort of deceit.
- To claim, you must show a false statement, dishonesty, that you relied on it and that you suffered loss as a result.
- The remedies are powerful: you can unwind the contract, claim damages for the losses flowing from it, or both.
- Claims usually have a six-year limit, but where fraud is involved the clock can run from when you discovered it.
You buy a business on the strength of its accounts, only to find the figures were invented. You invest after being told something the other side knew was untrue. When someone lies to get you into a deal and you lose out, the law treats that far more seriously than an ordinary broken promise.
That is the territory of fraudulent misrepresentation, known in law as the tort of deceit. It is harder to prove than other claims, because it turns on dishonesty, but the remedies are among the most powerful the civil courts offer.
This guide explains what fraudulent misrepresentation is, how it differs from the milder forms of misrepresentation, what you have to prove and the practical steps to bring a claim, so you can act on solid ground and avoid the traps that sink fraud claims.
If you think you have been deceived into a deal, our civil fraud and investigation solicitors offer a free 30-minute consultation.
What is fraudulent misrepresentation?
A misrepresentation is a false statement of fact, or of law, made before a contract that persuades the other party to enter into it. It becomes fraudulent where the person making it knew it was false, had no belief in its truth, or was reckless as to whether it was true. The common thread is the absence of any honest belief, which is to say dishonesty. That test was set out in Derry v Peek in 1889 and still applies today. Because it involves deliberate dishonesty, fraudulent misrepresentation gives rise to the tort of deceit.
How it differs from negligent and innocent misrepresentation
There are three types of misrepresentation, often described as a ladder of seriousness:
- Fraudulent: the statement was made dishonestly, knowing it was false or not caring whether it was true. This is the tort of deceit.
- Negligent: the statement was made carelessly, without reasonable grounds for believing it, even if there was no intention to deceive. This falls under the Misrepresentation Act 1967.
- Innocent: the statement was made honestly and on reasonable grounds, but turned out to be wrong.
The difference matters because fraud is the hardest to prove, as you have to establish dishonesty, but it unlocks the widest remedies. With negligent misrepresentation under the 1967 Act the burden actually flips: once you show a false statement induced the contract, the other side has to prove they had reasonable grounds to believe it was true. For that reason these claims are often pleaded in the alternative.
What you have to prove
To succeed in a fraudulent misrepresentation claim, you generally need to show that:
- A false statement of fact or law was made to you.
- The person making it knew it was false, had no belief in its truth, or was reckless as to whether it was true.
- It was intended to be relied on, and you did rely on it in entering the contract or transaction.
- You suffered loss as a result.
The dishonesty element is the crux, and the hardest part, because it concerns the other person’s state of mind. It is also worth knowing what does not count. Statements of opinion, sales puff and statements about the future are generally not enough, unless the opinion or intention was never genuinely held. A promise made with no intention of keeping it can itself be a false statement about a present state of mind. Silence is usually not a misrepresentation either, although a half-truth, or failing to correct something that has since become false, can be.
What remedies are available?
The remedies for fraud are powerful, and you can often seek both:
- Rescission: the contract is unwound and both parties are put back in the position they were in before it was made. This can be barred if you affirm the contract after learning the truth, delay too long, a third party has acquired rights, or it is no longer possible to restore the position.
- Damages: in deceit you can recover all the losses that flow directly from the transaction, even ones that could not have been foreseen. That is wider than the damages available for an ordinary breach of contract, and they are not cut down for any carelessness on your part.
One further point matters. You cannot exclude liability for your own fraud, so a clause that tries to do so will not protect the person who lied, though clauses limiting liability for non-fraudulent misrepresentation are allowed if they are reasonable. And where there is a real risk the other side will move or hide assets before judgment, the court can grant a freezing order to preserve them.
How to make a claim
A fraud claim rewards preparation. The practical steps are usually these.
Start by gathering and preserving the evidence: the false statement itself, in emails, brochures, accounts or messages, proof that you relied on it, proof of your loss, and anything suggesting the other side knew the truth. Then take advice on the best route, whether that is a deceit claim, a negligent misrepresentation claim under the 1967 Act where the burden shifts to the other side, or a breach of contract claim, often pursued together or in the alternative.
If assets might disappear, urgent protection can be sought, sometimes without notice to the other side. A letter of claim setting out the misrepresentation, your reliance and your loss often resolves matters before proceedings. If it does go to court, fraud has to be pleaded clearly and with proper particulars, and substantial claims are heard in the High Court. A director who personally made the fraudulent statement can be sued in their own name, even where a company was the other party to the contract.
How long do you have to claim?
A deceit claim generally has to be brought within six years, under the Limitation Act 1980. But there is an important protection where fraud is involved: the clock does not start to run until you discovered the fraud, or could with reasonable diligence have discovered it. So a fraud that has only recently come to light is not necessarily time-barred, even if the original deal was years ago. Even so, evidence fades and assets move, so acting promptly once you suspect deception is always the safer course.
Speak to a civil fraud solicitor about a fraudulent misrepresentation claim
Fraud claims are among the most demanding in civil litigation. They carry a high bar of proof, strict rules about how dishonesty must be pleaded and a real premium on moving quickly to preserve both evidence and assets. Getting early, specialist advice can make the difference between recovering your losses and losing the chance to.
At Osbourne Pinner, our civil fraud and investigation solicitors advise individuals and businesses on bringing and defending claims for fraudulent misrepresentation and deceit, from assessing the evidence and securing freezing orders through to recovering losses at trial or in settlement.
Please note that this article is for informational purposes only and does not constitute legal advice. We always recommend speaking to a qualified solicitor for advice tailored to your specific circumstances.
We offer a free 30-minute consultation to discuss your situation. You can speak with us via video call or visit our offices in Harrow, Canary Wharf, Piccadilly Circus or Manchester. To arrange your consultation, call 0203 983 5080, email [email protected] or complete the form below.
