Definition According to Section 18 ‘Misrepresentation’ means and includes:
(a) Positive assertion of unwarranted statements of material facts believing them to be true. If a person makes an explicit statement of fact not warranted by his information (i.e., without any reasonable ground), under an honest belief as to its truth though it is not true, there is misrepresentation. Illustration. A says to B who intends to purchase his land, “My land produces 10 quintals of wheat per acre.” A, believes the statement to be true, although he did not have sufficient grounds for the belief. Later on, it transpires that the land produces only 7 quintals of wheat per acre. This is a misrepresentation.
(b) Breach of duty which brings an advantage to the person committing it by misleading the other to his prejudice. This clause covers those cases where a statement when made was true but subsequently before it was acted upon, it became false to the knowledge of the person making it. In such a case, the person making the statement comes under an obligation to disclose the change in circumstances to the other party, otherwise he will be guilty of misrepresentation. Illustration. A, before signing a contract with B for the sale of business, correctly states that the monthly sales are Rs 50,000. Negotiations lasted for five months, when the contract of sale was signed. During this period the sales dwindled to Rs 5,000 a month. A, unintentionally keeps quiet. It was held that there was misrepresentation and B was entitled to rescind the contract
(c) Causing mistake about subject-matter innocently. If one of the parties induces the other, though innocently, to commit a mistake as to the quality or nature of the thing bargained, there is misrepresentation. Illustration. In a contract of sale of 500 bags of wheat, the seller made a representation that no Sulphur has been used in the cultivation of wheat. Sulphur, however, had been used in 5 out of 200 acres of land. The buyer would not have purchased the wheat but for the representation. There is a misrepresentation.
Effects of Misrepresentation
In case of misrepresentation, the aggrieved party has two alternative courses open to him—
(i) he can rescind the contract, treating the contract as voidable; or
(ii) he may affirm the contract and insist that he shall be put in the position in which he would have been, if the representation made had been true (Sec. 19).
Misrepresentation does not entitle the aggrieved party to claim damages by way of interest or otherwise for expenses incurred.