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MISREPRESENTATION
In contract Law terminology, misrepresentation means a party providing false statement to another before entering into an agreement or contract.
There are basically three types of misrepresentations:
- Fraudulent Misrepresentation
- Negligent Misrepresentation
- Innocent Misrepresentation
Fraudulent Misrepresentation occurs when a person intentionally tries to deceive by providing wrong information. Negligent Misrepresentation occurs when wrong information is provided by negligence and there is no reasonable basis to believe that the information is true. Innocent Misinterpretation occurs when the presenter had reasonable grounds to believe that the wrong statement made by him was false.
Generally many of the contracts happen at the small level of trade include misrepresentation. It is expected that in contract terms or description of the product, which are part of the offer, should be based on the facts and not on the personal opinion. But in one to one trade, most of the time the product specifications are based on personal view of the seller, many times intentionally inflated, many times unintentionally. For example stating that the shampoo you are selling is the best for hair wash, is just an opinion until a complete research in laboratory as well as feedback from public supports it. Also the buyers many times don’t try to go in detail and ask for the proof supporting such specifications. And such trades are not even documented. So, legal actions, on such cases, cannot be taken. (Turner, 2008)
MITIGATION OF LOSS
There is a clause in the contract act which is pertaining to compensating the innocent party for the damages he or she suffers due to the breach of contract. The concept of mitigation is the compromise that the innocent party has to make if he fails to take necessary steps to mitigate his loss. The law recognises that if an innocent party has taken sufficient measures to reduce losses then the claim for damage should be reduced to that extent to which losses have been prevented. The concept of compensation says that the suffering party should be compensated to put him to the condition he should have been if the breach of the contract was not there. According to the law, the party should take all the steps necessary to reduce the loss; it is the innocent party’s duty to mitigate losses. However this duty is not a legal one and is not an enforceable obligation.
Even though the law recognises that the innocent party should take all the measures to mitigate the losses; it does not permit the following acts:
- Steps taken which are not in the ordinary course of business
- A step which will destroy or sacrifice property of his own
- Cause any loss to another innocent party
- Risking his money too much by entering into a speculative trading contract etc.
These steps to mitigate the losses may cost the innocent party some money. However the corollary rule protects the innocent party as he can include all the mitigation costs into his claim of damage. (Vermeesch, 2005)
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