Contract Glossary
Material Misrepresentation
Definition
Material misrepresentation is a false statement of fact that is significant enough to influence a party's decision to enter into a contract. If a party relies on a material misrepresentation when agreeing to a contract, they may have grounds to void the agreement or seek damages. The misrepresentation can be intentional (fraud), negligent (careless statement without verifying accuracy), or innocent (honestly believing the statement was true). The key factor is materiality, the false statement must concern something important enough that a reasonable person would have acted differently had they known the truth.
In Practice
A seller lists a commercial property and tells the buyer that the roof was replaced two years ago. Relying on this, the buyer purchases the property without a detailed roof inspection. Six months later, extensive leaks reveal the roof is original (20+ years old) and needs $80,000 in replacement. The buyer sues for material misrepresentation, the roof's age and condition were material facts that influenced the purchase decision and price.
Example Clause
Each Party represents and warrants that all statements, information, and materials provided to the other Party in connection with this Agreement are true, accurate, and complete in all material respects. Any material misrepresentation shall constitute a breach of this Agreement and entitle the non-breaching Party to rescind this Agreement and recover damages.
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