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What is “fraudulent misrepresentation”?

On Behalf of | Sep 26, 2018 | business law, Firm News |

Most people generally understand the term “fraud” to mean something purporting to be what it is not. A person may be considered a fraud if they claim that they have skills they do not actually possess, or a product may be a fraud if it is styled to deceive consumers into believing that it is a more valuable item that it actually is. Fraud exists in the world of business contracts, too, and readers of this Louisiana legal blog may have run into the challenging problem of fraudulent misrepresentation in their commercial agreements.

Fraudulent misrepresentation involves untruths or outright lies put forth during the negotiations of a contract. When false statements are made with the purpose of inducing another party to enter into a contract, the foundation of fraudulent misrepresentation is laid. If the innocent party then suffers a loss due to the trust they placed in the party that perpetrated the fraud on them, they may have damages to claim in a lawsuit based on the contract.

A contract that is based on deceit is not valid and, therefore, a party who is induced into contracting with a dishonest entity is not bound to perform under the terms of the agreement. They may have a variety of legal remedies to pursue if they choose to sue for their losses from the fraud-based agreement.

When creating contracts for small businesses, individuals can benefit from having business law attorneys review those documents for questionable or fraudulent terms. For entities that do not employ in-house attorneys, private legal teams can provide the support businesses need to avoid costly and time-consuming contract-based lawsuits.