Misrepresentation

A misrepresentation is a false statement of fact, made by one party to the other before or when a contract is made, that induces the other party to enter it. The statement does not have to be the only reason for signing, but it must have played a real part in the decision, as with a false statement about a business's turnover or a property's condition.

Rescission undoes the contract from the start, returning both parties as far as possible to where they were. It is available for all three kinds of misrepresentation, but the right can be lost if the innocent party affirms the contract after learning the truth, delays unreasonably, cannot substantially restore what it received, or if a third party has acquired rights in the meantime.

The more useful protection is often statutory. Section 18 of the Australian Consumer Law, which is Schedule 2 to the Competition and Consumer Act 2010 (Cth), provides that a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. A statement can breach section 18 even if the person making it honestly believed it.

Under section 236, a person who suffers loss or damage because of conduct that contravenes section 18 can recover that loss from the person who engaged in the conduct, or from anyone involved in the contravention. The action may be commenced within six years after the day on which the cause of action accrued. Working out exactly when that period starts can be technical, so it is safer to act early.

Financial services are treated differently. Section 131A of the Competition and Consumer Act 2010 (Cth) excludes conduct in relation to financial services from this part of the Australian Consumer Law. Instead, section 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) prohibits misleading or deceptive conduct in relation to financial services, and section 12GF gives a right to damages, also with a six year limit.

Yes. A literally true statement can mislead if it leaves out something that changes its meaning. Silence on its own is treated more cautiously. In Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357, French CJ and Kiefel J explained that non-disclosure is judged in its full context, and that asking whether there was a reasonable expectation that a fact would be disclosed can help decide whether silence was misleading.

A genuinely held opinion is generally not a statement of fact, although it can carry an implied statement that the person holds it and has a basis for it. Predictions have a special rule under the Australian Consumer Law. Under section 4, a representation about a future matter is taken to be misleading if the person making it did not have reasonable grounds for it, and that person is taken not to have had reasonable grounds unless evidence to the contrary is produced. A sales forecast with no reasonable basis can therefore be misleading even if it was honestly believed.