A misrepresentation is a false statement of law or fact made by one party (party A) to another party (party B) which induces that other party (party B) to enter into a contract.
The three elements that must be present for misrepresentation are:
(i) Someone has made a statement of fact or law;
(ii) That statement is false;
(iii) That false statement has induced the innocent party to enter into the contract
It is important to distinguish between a “statement of fact” and a “statement of opinion”.
A statement of opinion, if false, as a rule, does not constitute a misrepresentation. On the other hand, a statement of fact, if false, can constitute a misrepresentation.
Example: For instance, the seller of a motorcycle would only be making a statement of opinion if he stated that the motorcycle might be able to transport 500 kg of goods and requested that you test it before purchasing it. Let’s say, on the other hand, the seller, knowing that a motorcycle was actually 5 years old, stated to a buyer that it was only 5 months old. If the buyer purchased the bike in reliance on this statement, this would be a misrepresentation.
In Hong Kong, if a party is found to have made a misrepresentation, under the Misrepresentation Ordinance (Cap. 284 of the Laws of Hong Kong), the innocent party can apply for an order to rescind the contract (whereby the contract will be cancelled, and the parties will be restored to their position before the contract was made) and to claim compensation.
