Basics You Need To Know On Misrepresentation

The Malaysian sales culture, that is base on commission, has created for a price competitive environment , where sales talk were irresponsible, and sales personnel have been delinquently deceitful as to the representation of the quality of the product or services. As a young entrepreneur in the furniture industry and a consumer myself , i have experienced first hand, where sales or manufacturer had mislead me to believe on the origin of a product, quality of the merchandise and other false information was feed to me into believing what i was purchasing is more than what it was, and as a consumer we have a right to counteract in courts as to such false information being feed irresponsible, and it is actionable under misrepresentation.

Whenever a contract is entered, in this case, a consumer contract, there must be an intention to create legal relation. i.e. it requires a certain kind of consent of the consumer to purchase a product and where there is a impairment to such consent, it can renders such contracts violable.

In general terms , misrepresentation is an untrue statement of fact made by one party, that induces the other party to enter into a contract. However for it to be actionable in court, there is a few requirement i) It has to an untrue statement; ii) it has to be a statement of fact; iii) it must induces the innocent party to enter into the contract.

i) Untrue statement

For misrepresentation to be actionable, an untrue statement must be made by the sales personnel to the consumer while acting within his scope of authority.

Things gets tricky where omission(forget) to reveal information comes into question, in general, a mere silence cannot amount to a false statement, under 'caveat emptor' (let the buyer beware) , the consumer bear the responsibility to asks questions on matters that will be decisive of his decision, seller has no responsibility to volunteer information. However there are a few exception to caveat emptor , where the duty to disclose information is imposed by law.

a) First such duty will arise in contracts that requires 'uberrimar fidei'(utmost good faith). Examples of contract of such nature are insurance contract, contract for sales of land or shares. As such, a failure to disclose important matters amounts to falsely presenting a fact. In an insurance contract , the insured has the duty to disclose matters relevant to assessing the risk and premium of the insurance to the insurer. Upon failure to disclose properly such information, will render insurance contract violable. The insurer may elect not to pay claims even if claim in question has no connection to the information fail to disclose. Basis of such rule is certain information , are difficult or impossible for the other party to find out themselves.

b) Next, is subsequent falsity, that is, where a true statement was made, but has subsequently became false due to a change in circumstance, and failure to disclose changes will amount to misrepresentation. For example, importing or using certain product or ingredients has subsequently declared unsafe by the government, sales were expected to reveal such information. Same applies to changes in company's policy in warranty for example, where it was reduce from 10 years to 5, the sales cannot keep silence on such matters.

c) In some contract of special relationship, duty to disclose information is imposed by law. for example doctor - patient , lawyer - client etc.

ii) statement of fact

the law distinguish between opinion and facts, giving a mere opinion does not amount to misrepresentation. On matters where no party is expected to know the facts, whatever statement made on that matter is considered an opinion. For instance, where the the longevity of a product is in question, and it depends on the use and care by the consumer, a guess made by the sales does not amount misrepresentation.

Also a statement must base on an existing fact, not reference to the future, like a sales made a reference to the future value of gold for example, is just an opinion.

iii) Inducement

For an untrue statement of fact to be actionable, the statement made must be one of the reason for the consumer to made the purchase. For the truth to the statement is known ; or it did not affect his decision when purchasing, it is not actionable. Also such statement must be made before or at the time of contract, whatever that was said after the product was sold, is irrelevant.

The knowledge of the untrue statement has to be a actual genuine acknowledgment , not just mere suspicion. Possession of the means (or ways) with the consumer, to find out the truth of the statement if checked properly is not applicable, even if the consumer was invited to check or inspect the validity of the statement. For example, on the brochure, it is printed on, the website of the company or brand, and when origin of the product was in question, that is if the sales claims that it is imported from Spain, the customer with the access to internet is not expected to go online and find out the truth of such statement. He can sue as long as he relies on the words of the sales. But , where in fact the costumer did went on and investigate words by sales are considered not relied upon.

In general there are two types of misrepresentation in a consumer contract. Fraudulent misrepresentation (also tort of deceit) is where businesses while making a statement which he or she at the time of making it does not believe it to be true or has been reckless on it's truth. In situations of negligent misrepresentation, where the maker of the statement believe it as to be true, for example , a retailer presented to the consumer what he was told by the manufacturer, and he has took the reasonable means to confirm it's truth , then there is no misrepresentation on the part of the retailer.

Some vendors may try to exclude liability from fraudulent misrepresentation, like prints of terms and condition of sales , or just a statement printed on the invoice. All these were made impossible and illegal by law.

Where a misrepresentation is upheld by court, it renders the consumer contract violable, the consumer can elect to rescind the contract and vendor will be required to indemnify the consumer i.e. return the customer's payment. However in situation where it is unreasonable or impossible for the merchandise or subject matter to be restored to the original condition, like when the consumer has broke the product by his own fault , then such remedy will not be available.