Misrepresentation

Definition of misrepresentation, what is misrepresentation, three types of misrepresentation, fraudulent misrepresentation, compensatory damages, negligent misrepresentation, innocent misrepresentation, misrepresentation example involving, related legal terms and issues.

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False representation refers to a deceptive assertion or claim made by an individual that is untrue and intended to mislead another party. This concept is crucial in understanding fraud, as it encompasses the various ways individuals can manipulate information or present false facts to gain something of value, such as money or property. False representation can take many forms, including verbal statements, written documents, or even conduct that implies a falsehood.

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5 Must Know Facts For Your Next Test

  • False representation is a key element in establishing fraud cases and can result in civil and criminal penalties for the perpetrator.
  • It is important for the misrepresentation to be material, meaning it must have a significant impact on the victim's decision-making process.
  • False representation can occur through omission as well; failing to disclose a significant fact can be just as fraudulent as making an outright lie.
  • Victims of false representation can seek legal remedies such as rescission of contracts or damages to recover losses incurred due to the deception.
  • In some jurisdictions, false representation can lead to charges of conspiracy if multiple individuals are involved in the deceptive act.

Review Questions

  • False representation is fundamental in proving fraud because it shows that one party made a misleading claim intending to deceive another. To establish fraud, it must be demonstrated that the misrepresentation was made knowingly or recklessly, and that it materially affected the victim's decision. Without false representation, it becomes difficult to prove that any fraudulent intent existed.
  • In business transactions, false representation can occur through misleading advertising, falsified financial statements, or deceptive contractual terms. These actions can lead to severe legal implications, including civil lawsuits for damages and potential criminal charges against the perpetrators. Businesses must ensure that all claims made are truthful and verifiable to avoid legal repercussions.
  • False representation raises significant ethical concerns in both personal relationships and corporate environments. In personal contexts, deception can undermine trust and lead to emotional harm, while in corporate settings, it can result in financial loss and damage to reputations. Analyzing these situations requires understanding the broader impact of deceitful behavior and the responsibilities individuals and organizations have towards honesty and integrity in their dealings.

Related terms

Fraudulent Misrepresentation : A specific type of false representation where false statements are made knowingly or with reckless disregard for the truth, leading to harm or loss for the victim.

Intent to Deceive : The deliberate intention behind making a false representation, indicating that the individual knows their statement is false and aims to mislead the other party.

Material Fact : A fact that would influence a reasonable person's decision-making process; false representations often involve misstatements of material facts.

" False Representation " also found in:

Subjects ( 3 ).

  • Business Ethics in Nanotechnology
  • Media Law and Policy
  • Public Relations Ethics

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False representation

Lying in a statement to persuade someone to enter a contract.

He was found guilty of making a false representation

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Other useful terms:

An agreement between two or more people (or groups) to do (or not to do) something. The agreement can be enforced by law.

Misrepresentation

A lie told to persuade someone to enter into a contract.

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misrepresent

Definition of misrepresent

transitive verb

  • misinterpret

Examples of misrepresent in a Sentence

These examples are programmatically compiled from various online sources to illustrate current usage of the word 'misrepresent.' Any opinions expressed in the examples do not represent those of Merriam-Webster or its editors. Send us feedback about these examples.

Word History

1649, in the meaning defined at sense 1

Dictionary Entries Near misrepresent

Cite this entry.

“Misrepresent.” Merriam-Webster.com Dictionary , Merriam-Webster, https://www.merriam-webster.com/dictionary/misrepresent. Accessed 26 Sep. 2024.

Kids Definition

Kids definition of misrepresent, legal definition, legal definition of misrepresent.

intransitive verb

More from Merriam-Webster on misrepresent

Nglish: Translation of misrepresent for Spanish Speakers

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Misrepresentation

Practical law uk glossary 9-107-6848  (approx. 4 pages).

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Civil Fraud: Fraudulent Misrepresentation in contract law (in business)

No-one likes being taken for a fool.

These days, you don’t need to be a fool to be taken for fraud.

Civil fraud is one of those causes of action which has universal application – it can apply across all factual backgrounds.

When it comes to business contracts, fraudulent misrepresentation is the cause of action that businesses rely on to get legal redress.

There is no lawful transaction that cannot be tainted by fraud, and set aside with damages payable where loss has been suffered as a result.

It has been said that fraud unravels everything.

The more serious the fraud, the more likely a court is to loosen the restrictions in causation and relax the strict rules of remoteness of loss to increase recovery of damages and compensation.

The basis for that statement is deception. Not just a negligent or innocent misrepresentation .

Fraudulent Misrepresentations in Business

Scams have progressed far beyond phishing emails, PayPal and eBay scams. They’re so prevalent, an entire industry of fraud investigators exists to trace online scams.

It includes falsification of documents, forgery, and counterfeiting, identity theft, accounting fraud. The common element is that they all involve a type of deception.

There is fraud in the civil context and criminal fraud.  Here, we’re focusing on fraud in the commercial law context: civil fraud as it applies to businesses.

The civil law applies to all of us, business, individuals, and even those outside the country.

Criminal law is different - options include investigating yourself, report the fraud to the police for recourse by the criminal law. If the fraud is actioned the criminal law courts imposes a punishment – a custodial sentence or a fine (paid to the State) on behalf of society for reprehensible conduct.

In business law, fraud doesn’t necessarily mean theft, Business fraud can leave to theft; it primarily about deception, whether its intentional or not.  

What is known as theft in the criminal law is actionable under the civil law with the tort of conversion . Conversion doesn’t bring with it the heavy burden required of fraud or dishonesty, as you'll see below.

The civil law provides civil remedies in actions in personam , when each of the elements of an applicable causation of action has been satisfied.

Fraud isn’t really another word for dishonest: the test for fraud doesn’t necessarily require dishonesty.

Elements of Fraudulent Misrepresentation

  • Dishonest Intention - in civil law, fraud doesn’t necessarily require a deliberate dishonesty, or a dishonest intention. The civil law sets its own standard for fraud and actionable dishonesty, and what isn’t. The tort of deceit and fraudulent misrepresentation requires a fraudulent intention on the part of the maker of a statement.
  • Reliance The law of fraud is based on the concept that a falsehood is made with the intention that it should be acted on by the party receiving it.

Think about it for a moment.

Someone says something in a conversation leading up to a transaction which they know isn’t true.

If it doesn’t affect the behaviour of the claimant, there’s no cause of action .

That means that without reliance on it by the receiver of statement, the essential ingredients of the cause of action haven’t been satisfied. There’s no:

  • dishonesty, or

Also, a business can be defrauded without suffering any loss.

The civil law only awards damages to recover actual loss suffered. It’s for the claimant to specify what the actual loss suffered is to recover it.

Cases of Fraud

Courts don’t simply assume that a person behaves fraudulently.

And they won’t draw sharp breath and say “it’s fraud” and find against an alleged fraudster.

It’s such a serious allegation that the fraud must be:

  • distinctly alleged and asserted as facts in the particulars of claim , and
  • distinctly proved with probative evidence in witness statements.

To succeed in a fraud claim, there’s no avoiding it.

There’s no jumping to conclusions.

It means, in turn:

  • identifying the form of the alleged fraud
  • the context in which the fraud was committed – the background - and then
  • producing the evidence  to show that the facts alleged satisfy the burden of proof on the balance of probabilities for fraudulent misrepresentation.

That’s what proof is all about.

Guilt is not just assumed just because someone says a fraud has happened.

It must be proved with evidence.

That’s an application of the Rule of Law: everyone is judged by the same standard. 

Ending cases early for Fraud?

Of all types of cases brought through courts that there are, fraud cases are the least likely to be brought to an early conclusion.

That’s for a number of reasons:

  • courts will not accept allegations of fraud at face value: just because someone says that it happened
  • if there’s alternative explanation that does not rely on fraudulent behaviour the case law says the innocent explanation will be accepted
  • someone accused of fraud - especially fraud - should have a chance to defend themselves and put their side of the case

Cases of fraud have a tendency to fall apart once the defendant start arguing back. Bad claims won’t succeed. The only two methods to bring a legal case to an end early – summary judgment and strike out applications – will almost certainly fail. More on that below.

Once the allegations (set out in the particulars of claim) are proved on the evidence (in a witness statement), the court is in a position to assess the allegations for their falsity at the trial.

Here’s how fraudulent misrepresentation works in the civil law - in civil claims.

Essential Elements of Civil Fraud

In fraud cases, a step-by-step process is applied to identify whether each of the elements have been satisfied.

Legally speaking, to make out a claim for fraud requires:

  • a representation
  • which is false , where
  • knew the representation was false, or
  • had no belief in the truth of the representation, or
  • was reckless as to whether the representation was true or false, and
  • intended that the claimant rely on the representation – ie inducement , and
  • the claimant in fact relied on representation – ie reliance , and
  • as a result , the claimant suffered loss and damage.

If all of that must be alleged and proved on the balance of probabilities .

That being the case, the claim for fraud is likely to be successful.

They're not trivial matters. They're not things to gloss over, to fudge or believe that the lack of detail won't be picked up on by your opponent. It's the detail that needs to be drawn out in the Particulars of Claim , a Defence and witness statements , which are each endorsed with statements of truth .

The Context of Fraud

Fraud always happens in a context.

In business transactions there are a whole host of interactions and events.

What is the Background that Matters?

As a consequence, there are a series of events that are taken into account to prove fraud.

It includes the background or lead up to the statement, such as:

  • the position and knowledge of both the maker – the buyer, seller, service provider, licensee, licensor - and the receiver of the statement
  • what they both thought
  • what they both knew
  • what they thought was going to happen
  • what actually happened

Those interactions might involve:

  • exchanges of emails, conversations, discussions, meetings
  • advertising campaigns and delivery of marketing brochures
  • exaggerated claims,
  • promises to do something – or not
  • talk of capabilities or performance levels of a product or service
  • commencement of supply of services in reliance of statements made
  • the condition of goods
  • qualifications and conditions to offers, services and products

So there’s a lot going on to extract a claim for fraud which comes into play.

All of it is relevant in fraud cases.

So with that, the first element is what is the alleged fraudulent/dishonest or deceptive representation?

1.  The Representation in Fraudulent Misrepresentation

Fraud starts with a representation: a statement. It doesn’t need to be spoken or even in writing.

Only when the representation is known can the allegation of fraud can be assessed for dishonesty in the legal process by courts.

Claimants are required to clearly identify what was said and/or done before it can be assessed for falsity: before the honesty of the representor can even be called into question .

Fraudulent statements can be delivered in a whole host of ways.

The law distils all the forms they may take down to these…

a.   Express statements:

These are written statements and statements made in a conversation

Express statements are interpreted in a particular way.

It’s what a reasonable person would have understood from the words used in the context in which they were used.

That means that courts use an objective standard to work out what the receiver understood from what was said.

What a court finds the receiver understood it to mean will in turn depend on factors such as:

  • the nature and content of the statement
  • the context in which it was made
  • the characteristics of the maker and of the person to whom it was made, and
  • the relationship between them.

b.   Implied Representations

These include gestures and conduct.

What happens without words can sometimes be more misleading than with express words.

That’s because express words create a hook against which to cast the reality of the events.

When other things are going on in the background, it can complicate matters dramatically.

For that reason alone, with implied representations, the context in which the statement is made become even more important.

That’s because it’s what a reasonable person would have inferred was being implicitly represented by the maker's words and conduct, in their context.

It comes down to whether in all the circumstances it has been impliedly represented that there was some state of affairs (ie facts) different to the reality.

In one case ascertaining the difference was put like this:

[Would] a reasonable representee […] naturally assume that the true state of facts did not exist and that, had it existed, […] would [he] in all the circumstances necessarily have been informed of it? 

Courts always have to assess what a reasonable person would have inferred was being implicitly represented by the representor's words and conduct in their context.

That involves working out:

whether a reasonable representee in the position and with the known characteristics of the actual representee would reasonably have understood that an implied representation was being made and being made substantially in the terms or to the effect alleged. 

c.   Silence in Fraud Cases

Then, there’s silence. 

Silence by itself can’t form the basis of any sort of misrepresentation, whether innocent , negligent or fraudulent. 

However, silence is usually mixed with express and implied misrepresentations.

Ambiguous Statements

Courts recognise statements can be made where:

  • the truth may be mixed with evasion and omissions, with false statements
  • the literal truth can be said, but the receiver of the statement will understand it differently
  • the meaning is ambiguous. There’s a difference between spontaneous ambiguity and contrived ambiguity.
  • express statements carry with them implications in the context of a conversation or course of dealing
  • the implication of a statement may be that what has been expressly stated is complete: it covers everything on a particular matter, and anything that has not been referred to does not exist.

The maker of the statement – in whatever form it takes:

  • must intend the statement to be understood in the sense in which it is understood by the claimant, or
  • should have deliberately used the ambiguity for the purpose of deceiving him and succeeded in doing so.

As Lord Cairns in Peek v Gurney (1873) said, in the end:

  • there must be some active misstatement of fact, or, in all events, such a partial and fragmentary statement of fact, as that withholding of that which is not stated makes that which is stated absolutely false

Breaking it Down

It makes sense that to draw a distinction between what a representation:

  • does not say, and
  • what implications can be drawn from the statement: what it impliedly represents in the context that the statement was made.

A statement which is literally true may nevertheless involve a misrepresentation because of matters which the representor omits to mention.

It has been said like this:

… it is said that everything that is stated in the [share] prospectus is literally true, and so it is; but the objection to it is, not that it does not state the truth as far as it goes, but that it conceals most material facts with which the public ought to have been made acquainted, the very concealment of which gives to the truth which is told the character of falsehood.

The representations are made within a factual context.

The representation may well not be identical to any stated words, but become a matter of overall impression.

Statements of Fact

The baseline is that the representation must be one of fact.

Statements of fact may be implied from words or conduct, or a combination of the two. That is, express representations and/or implied representations. 

The misrepresentation:

  • must be of present fact or law ; and
  • may be made by words or conduct.

Whatever its form, must nevertheless be clearly identified.

Statements of fact may in certain circumstances include:

  • statements of opinion : where the relevant fact is that the defendant holds an opinion, the opinion must be intended to be relied on. It is relied upon by the receiver of the statement and suffers damage as a result a dishonestly expressed opinion. That’s usually sufficient.
  • statements of present intention: Say you and I are in dispute. We enter a settlement agreement. I have no intention of performing what is required of me in the contract. Equally, I could draw a cheque to you with the intention of allowing it to be paid. But then there are always problems proving that the person held the relevant subjective intention (see Falsity below) at the time of making the representation. That’s when (then) future facts colour the picture.
  • the person’s intention is proved to be false at the time the statement was made, or
  • a person promises to do an act, when they have no intention of fulfilling the obligation.

It’s showing that there was no intention for the expressed intention to be carried through.

  • support for a third party statement of fact: approval or support for a false representation made by some third person can for the basis of a statement of fact provided the required fraudulent subjective intention exists
  • statements of fact implying other facts: it’s possible to interpret an express or implied statement as implying certain other facts. And those facts would be misleading unless the statement is amplified or corrected. 
  • multiple statements of fact: Different statements at different times are usually considered together over a timeline to draw out their combined effect as a representation of fact

They may take the form of a fragmented or partial version of the truth or a misstatement of fact: the key is whether the withheld material makes that which was stated false .

Also, the representation does not need to be made directly to an individual, it may be directed to a class of people intended to act on the representation.

Laudatory statements

Laudatory statements – those which aren’t intended to be taken seriously – aka puffery – can’t be misrepresentation for the purpose of fraud.

They’re the ones such as:

“We've got the best pies in London” "You won't find better rates anywhere else" "Cheapest cars this side of The Black Stump"

From a legal perspective, the way the civil law says it:

There is no misrepresentation in law in the case of mere exaggerated praise by a vendor of his wares, as the vendor is entitled to assume that his statement will be construed as mere puffing

2. Falsity of the Representation: What is dishonesty?

Once the fraudulent representation is identified (see above), you’re in a position to assess it.

That is, assess it for the untruth: how it was false.

The law doesn’t require every statement to be correct. Flexibility is built in at least 2 ways:

  • firstly, the statement may be substantially correct.
  • secondly, the further the distance from being correct, the more likely the receiver of the statement is to have reliance, had they known the true facts

The claimant must still prove the difference between:

  • what was represented and
  • what was actually correct

is enough to induce a reasonable person to do what they did.

Fraud or deceit requires positive proof that the defendant made the statement.

It’s not just assumed, or taken for granted. It is for the party alleging the statement was made to prove it .

What is the definition of fraud?

The test for fraud remains the test in Derry v Peek  (1889) 14 App Cas 337:

First, in order to sustain an action in deceit, there must be proof of fraud and nothing short of that will suffice. Secondly, fraud is proved when it is shown that a false representation has been made: knowingly, without belief in its truth, or recklessly, careless whether it be true or false.

That means, in turn, that the maker of the fraudulent statement must:

  • know what they are saying is false, or
  • have conscious knowledge of the facts alleged to render the statement false, or
  • not have cared one way or the other.

It’s when the maker of a statement has no real belief in the truth in the statement made that the intention to defraud exists.

But that alone does not make a fraud case. There are the other elements listed above.

If you approach it from the other direction - to prevent a false statement being fraudulent, there must always be an honest belief in its truth. 

A person’s subjective belief may cast against an objective standard – a reasonable belief - to test the likelihood of the belief.

The motive for the statement doesn’t come into it - it’s immaterial:

  • even where there no intention to cheat or to injure the person whom the statement was made, or
  • even if the motive was laudable, such as altruism, charity or benevolence.

The point is that maker of the statement tried to secure unfair or unlawful gain. The end game is irrelevant.

The test remains that the person lacked an honest belief in the truth or consciously unconcerned of the truth.

Reckless Statements 

The lack of belief in the truth - not caring one way or the other - or recklessness - is adequate to succeed on a fraudulent misrepresentation claim.

Recklessness is a type of dishonest knowledge. It's a type of intentional deception.

When statements are made recklessly, there is no requirement to prove that the maker of the statement knew it to be untrue.

The point was made clearly in Reese River Silver Mining Co Ltd v Smith (1869):

if persons takes it upon themselves to make assertions as to which they are ignorant whether they are true or untrue, they must, in a civil point of view, be held as responsible as if they had asserted that which they know to be untrue.

And in an 1891 case:

Not caring, in that context, did not mean not taking care, it meant indifference to the truth, the moral obliquity of which consists in a wilful disregard of the importance of truth…

This is consistent with the leading authority, Derry v Peek. There, Lord Herschell said that recklessness:

[recklessness is] a statement [by a person who] can have no real belief in the truth of what he states. To prevent a false statement being fraudulent, there must, I think, always be an honest belief in its truth.

So it’s not necessary that the maker of the statement was “dishonest” as used in the criminal law. What is required in civil law is dishonest knowledge, in the sense of an absence of belief in truth.

That’s the fraudulent intention.

Fraud Defences

But that’s not the end of the story. That’s because in fraud cases, people tend to take exception to being called a fraudster, and defend themselves.

There are 3 types typical fraud defences mentioned below:

A.   Reasonable Belief and State of Mind

B.   Alternative Explanations

C.   Corrections

A. Reasonable Belief and State of Mind

A reasonable ground for the belief usually avoids a successful claim for deceit.

However, it’s not the ultimate test: it’s a reality check. 

The likelihood of the belief in its truth might be contrasted against:

  • far-fetched claims:  the more far-fetched the belief is, the less likely it will be accepted as reasonable That's not to say that an unreasonable belief would properly give rise to a claim for fraud.

Rather, it goes to the likelihood that a person would hold the belief.

  • conscious indifference to the truth:  A person making a misrepresentation who was sufficiently reckless or careless as to the truth found an allegation of fraud as much as the knowledge that the statement was false.
  • suspected that the statement might be inaccurate, or
  • neglected to inquire into its accuracy,
  • without proving that he actually knew that it was false.

It’s these circumstances that the context and background of the case plays a real part in evaluating whether the fraudulent intention exists for any given representation.

It’s important to keep in mind that the representation is read against that background of the case.

B. Alternative Explanations

Where a more innocent (ie but not necessarily innocence), explanation is available that interpretation of the representation is likely to be adopted:

When assessing the probabilities the court will have in mind as a factor, to whatever extent is appropriate in the particular case, that the more serious the allegation the less likely it is that the event occurred and, hence, the stronger should be the evidence before the court concludes that the allegation is established on the balance of probability. Fraud is usually less likely than negligence.

There, Lord Hoffman is saying (in terms) that courts recognise that:

  • innocent representation is more like that negligence (ie carelessness), and
  • negligence is more likely than fraud.

That’s one of the bombshells in business litigation. If the misrepresentation has an innocent interpretation and the behaviour of the defendant as presented to the court can be explained away on the basis of innocence or negligence.

Also, qualifications and other circumstances can work against an allegation of fraud. For example, it can rarely be said that a car is likely to be in a condition which is "as new" if it is over 50 years old.

C. Corrections

When someone does make a misrepresentation, they have a continuing duty to correct it, and may do so any time up until it is relied upon.

When they do, it’s a complete defence to fraud.

That’s because the misrepresentation couldn’t have induced the claimant to act on it.

Corrections require positive steps and must be made fairly and openly. And the explanation needs to be clear. Which means unequivocal.

It’s not something you’d want to be hiding behind ambiguity.

It’s not adequate to:

  • say that the defrauded party could have discovered the truth themselves if they had tried
  • provide documents from which the defrauded party could have worked out the truth.

4.     Inducement and Reliance

The claimant must also prove that defendant intended the person to act on or rely on their false statement, in the manner that damage resulted.  

Inducement and reliance mean respectively:

  • the maker of the statement intended the meaning with which it was said or communicated, and
  • the receiver of the statement acted on the statement.

The 2 concepts add up to this: if the claimant would have acted in the same way in the event that the representation had not been made, there is no reliance. The action in deceit will be dismissed.

A few things about reliance:

  • The claimant that bears the burden of proof that they were induced
  • The representation isn’t required to be the sole statement upon which the claimant relied, but it must make a material contribution to the cause of their actions that followed
  • the statement relied on must have the character of a statement upon which the receiver was intended to rely It’s not enough that the maker of the maker suspects a person may rely on the statement
  • If the defrauded person acted on the misrepresentation they’re still liable, even if they drew an erroneous assumption from it, unless new knowledge removes the false belief brought out by the misrepresentation in the first place

Presumption of Reliance

  • Reliance is presumed where the person making the statement intended the representation to be understood in a particular way, and the receiver of the representation understands it in that way.
  • It’s a rebuttable presumption though. The burden of proof remains the claimant to show reliance on the fraudulent representation.
  • The claimant must show that they understood the statement in the sense (so far as material) which the court attributes to it and having that understanding, relied on it.

So, the defrauded person must prove they had been materially influenced by the representation.

It must be a moving factor in the decision-making process. It’s sufficient for a receiver of the statement to show that he might have acted differently absent the representation.

There may be reasons other than the representation for the claimant to have acted. That doesn’t mean that they weren’t induced by the statement. 

It’s quite a light test to satisfy to show reliance.

That doesn’t take much if they only need to be influenced by it. 

The sum total of the case law is that the attempt to deceive on the part of the maker of the statement must be successful.

Once the fraudulent statement is out there, you could say that the risk shifts to the maker of the statement, if it is relied on by the receiver.

It is sufficient if it is one of the inducing causes.

It has heightened importance with implied representations.

5.     Damages for Fraudulent Misrepresentation

Where each of the other elements of fraud have been satisfied, to complete the cause of action, damage must be suffered as a result.

It’s not a given that loss is suffered where there has been fraud.

Although there may be fraud which was relied on, there may be no damage suffered as a result of the fraud. There’s an example further down.

Damages in Tort Cases

Damages awards exist in the law of tort to put the injured party in the same financial position as they would have been in if they had not sustained the wrong.

To call damages “compensation” can be misleading, because the amount of damages recoverable reflects the actual damage which was (1) suffered, and (2) proved to have been suffered. Compensation is not a free handout.

So in tort law the measure of damages:

  • equates to the loss that they have suffered as a result of the conduct of the defendant, and
  • not in the position they would have been if the statement were true.

Put another way, damages in the tort are designed to put the claimant in the position they would have been in had the misrepresentation not been made .

Damages in Fraud Cases

Therefore, the starting point for the measure of damages is likely to be:

  • the difference between the price paid, and
  • the fair value of the property.

Then damages extend to any such loss which follows from the defendants’ fraud, even if the loss could not have been foreseen by the latter .

So, where fraud has resulted in purchase of property at an overvalue, damages is the difference between:

  • the value at which the property was acquired,
  • less the market value of the property at the date of the transaction.

This general principle applies unless there is good reason to depart from it – that is, that the claimant would not be fully compensated for the misrepresentation.

Assessments of Damages

In assessments of damages for fraud:

  • by way of damages the full price paid, but he must give credit for any benefits which he has received as a result of the transaction
  • consequential loss caused by the transaction
  • Where an event is a reasonably foreseeable result, it is likely that a court will assume that the defendant intended that consequence. That means the additional outcome of expanding the application of reasonable foreseeability, so as to escalate the amount of compensation recoverable
  • The claimant must take all reasonable steps to mitigate his loss once the fraud has been discovered
  • losses stemming from trading funds have been found to be recoverable, where the defrauded party was "locked in" as a consequence of the fraud

Furthermore:

  • fraudster profiting: it doesn’t matter one way or the other whether the defendant benefited financially  when calculating damages. It’s the loss to the claimant that counts;
  • profiting despite the fraud: where the claimant has made a profit in excess of the compensation that he would be entitled, the claimant has not suffered loss and damages are not recoverable
  • expenditure wasted: The claimant may recover a profit if it may be shown that the resources expended on the transaction may have been invested by another means.
  • already flawed assets : Where the claimant buys an asset as a result of a fraud and its value is subsequently discovered to be less as a result of a flaw not relating to the fraud, they are nevertheless entitled to recover the full loss of value of the asset after the flaw is discovered.
  • time bars in contracts: Limitation and exclusion clauses in contracts will not generally be effective in a fraud claim.
  • missing other profitable opportunities: A claimant may recover loss caused by having missed other profitable opportunities.
  • discovered the fraud or
  • could with reasonable diligence have discovered it.

Damages: Contract Law v Fraud

Civil fraud is a tort - usually result in a higher measure of damages in contract law .

That’s because:

  • the loss is assessed at the time the misrepresentation was relied on. In contract law, it’s assessed at the time the contract was made.
  • The damage suffered isn’t limited by reasonably foreseeability as at the time of the contract was formed. It’s usually assessed on the date of reliance on the misrepresentation. Other possibilities include:
  • The date that the tainted asset(s) were sold, and resulted in a loss on re-sale;
  • The date of the transaction, where the defrauded person does not resell and continued under the influence of the misrepresentation,
  • The date of re-sale where the deceived party is locked into ownership of the asset and cannot resell
  • The date that a sale could reasonably be expected to have been made
  • some other date as may be appropriate

For example, when shares obtained by fraud, the value should be calculated as of their date of purchase.

In fraud cases, the defendant is required to compensate for all the damage directly flowing from the transaction.

Example: No Loss for Fraud

In an overly simplified example:

Suppose a car sold for £100. Had the purchaser known of the fraud by the seller, they would have known that the market value of the car was £30. At this stage, the claimant can recover the £30 spent, but must also give credit for any money received for the sale of the car. If the car sold for £20, the purchaser could recover £10 in damages from the seller. Suppose then that the car is not sold. It’s an antique car. Over the next 2 years before the trial, the value of the car improves so that a purchaser with knowledge of the true condition of the car is £210. At this later time, the purchaser has not suffered any loss. In fact, the defrauded purchaser made a profit of £110.

This is a simplified example, because it ignores things that happen in the real world: repairs, advertising for sale of the car, inflation, taxes payable for the car and storage costs of the car.

Not to mention legal costs.

Burden of Proof in Fraud Cases

It is for the claimant to prove the facts (whether in a claim or in a defence) that give rise to the fraud. That includes the state of mind of the person making the representation and reliance.

Such is the seriousness of allegations of dishonesty are treated, a court will look for persuasive evidence that the dishonest conduct is more likely than not.

It’s in the public interest that courts do readily draw a conclusion that a fraudulent intention deception exists. 

That’s brought home by the clarity of the allegations and the standard of the evidence required to succeed in a claim for fraud.

The standard of proof is the civil standard, the balance of probabilities , in Re B  [2009] 1 AC 11  per Lord Hoffmann:

whether it is in the matter of identifying the relevant misstatement or in the finding of a dishonest mind, it is necessary to bear in mind the heightened burden of proof which bears on the claimant
the more improbable the event, the stronger must be the evidence that it did occur before, on the balance of probability, its occurrence will be established

If the evidence does not convince the court, the action will fail.

So it’s not just matter of having evidence of dishonesty. It’s a matter of dishonesty being more likely than not.

Fraudulent Misrepresentations of Company Directors

Directors might be able to shelter from negligence using principles of limited liability, but it’s not so easy with fraud.

The protection of limited liability of directors of companies does not extend to fraud. Company directors accused of fraudulent representation don't escape liability on the basis that the representation was made on behalf of their company (and not on their own behalf).

A director isn’t liable for the company's tort, they have their own personal liability for fraud.

Directors can’t avoid liability on the basis of saying …

I wish to make it clear that I am committing this fraud on behalf of someone else and I am not to be personally liable.

If the individual elements of fraud are made out against a director, they’re just as liable as the company.

They are liable not because they were a director, but because the director committed fraud.

And the fraud does not even need to be based on the same facts for a director to be liable with the company. The liability of the director and company are assessed independently of one another, just as with a common design to infringe intellectual property rights or a conspiracy to defraud.

Claim for wrongdoing by a director of a company can sometimes be brought by shareholders and joint venture partners on an entirely different basis: breach of their fiduciary duties . 

Liability of Employers and Employees

An employer will often be a better defendant than the employee due to the resources available to the business when a judgment comes to be executed.

When an employee makes fraudulent with the actual or ostensible authority of the employer – part of their job – the employer will be vicariously liable for the fraud and jointly and severally liable with the employee for it.

Strike Out Applications and Summary Judgment

It's rare for a court to grant summary judgment under CPR Part 24 by a claimant, when it depends on allegations of fraud or serious misconduct.

Court will not conduct a mini-trial to decide the resolution of the allegations. It will avoid conducting a mini-trial on the documents in evidence before the court in a summary judgment application.  

The deciding disputes is the matter for the trial judge: after disclosure has been given, and witnesses have been tested in cross-examination.

It’s established practice that complex cases which involve inferences of fact, the difference between what is improbable and fanciful is blurred, the case should be decided at the trial.

Add into that the serious nature of fraud cases, and applications for summary judgment or strike out applications are unlikely to succeed.

Other implications of Fraud

It's possible that there will be no confidentiality in what would otherwise be:

  • without prejudice communications where negotiations for a settlement agreement has been tainted by fraud
  • confidentiality in communications which has been lost - or deemed never to have existed in communications involving a fraud, such as those between co-conspirators in a conspiracy to defraud.

Alternative Courses

As you can well imagine, there are causes of action other than . As with variety of ways in which fraud can be perpetrated, there are different causes of action which exist in law to address it.

Sometimes an action for fraudulent misrepresentation isn't available because it does not fit the factual background of the case.  Fraudulent misrepresentation is specifically focused on addressing fraud which arises prior to a contract or a variation to a contract being agreed.

Breach of Fiduciary Duty

For example, fiduciaries duties arise when the level of trust placed in an employee, consultant or contractor is so high that it gives rise to an obligation to be undivided loyalty to the person that employs or engages them.

For example, agents of a principal are often found to owe higher standards of conduct which arise when they are agents, such as:

  • employees, such as people in sales positions, finance or access to the business's customer list or secret prices charged to different customers
  • consultants to the business
  • businesses external to the business, such as business agents, estate agents and brokers
  • those with specialised skillsets engaged to do a specialised job, go off and do the wrong thing by the company.  

For example, legal redress may be available when an employee or consultant to a company:

  • takes advantage of business opportunities made known to them during the course of their employment relationship and divert business opportunities to themselves in their new business
  • receives secret commissions from suppliers, and/or
  • engages in unlawful competitive activity .

The delegation of responsibility and ability to change the legal position of the employer can bring with it a series of legal remedies when trust is betrayed.

Typically, the abuse or betrayal of trust by a fiduciary involves abuse or misuse of:

  • the principal’s money
  • the principal’s property, whether it is land, leased premises, intellectual property rights, inventory or any other asset, and/or
  • maturing business opportunities which are properly those of the principal.

A breach of fiduciary duty takes place when the trusted person betrays their duty of good faith, and:

  • creates a conflict between their own interests and those of the business whose affairs they control, influence or represent
  • make a profit from the relationship with their principal.

The same sort of fiduciary duties apply to directors of companies.

Given the rigour that the law of fraud is applied, even forcibly advanced claims for fraud have a habit of falling apart.

The maker of a statement said to be fraudulent must:

  • intend their statement to be understood in the way it was understood by the claimant, or used ambiguity deliberately to deceive them, and
  • succeeded in doing so.

It is enough when the person defrauded was materially influenced by the misrepresentation. It can be one of many inducing causes to go into the transaction. It doesn’t have to be the only reason.

If on the other hand the representation was of no real consequence, it cannot be one of the reason why the transaction was entered.

To succeed:

  • the claimant bears the burden of proof on the balance of probabilities . The fraud must be proved to have been more probable than not
  • courts must be convinced that the fraud took place, the context of the inherent probabilities of the case
  • cogent and reliable evidence is required to support the claim.
  • the court must dispel any reason other than operative fraud.

Civil Fraud Lawyers

Someone been working against you to secure some unfair or unlawful gain, or deprive your business of a legal right?

Even when a fraudster comes clean and agrees to terms of settlement, in discussions of terms of a settlement agreement, solicitors can be of help. Don’t think that one deception can’t follow another.

After all, fraud can taint settlement agreements in the same way as any other transaction.

Our civil litigation lawyers have chased (with success) those responsible for some of the most difficult forms of fraud to detect and obtained legal remedies.

For advice on fraud law from a solicitor's firm with experienced civil fraud solicitors , contact us on +44 20 7036 9282 or [email protected] .

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The Law Dictionary

Your Free Online Legal Dictionary • Featuring Black’s Law Dictionary, 2nd Ed.

3 Types of Misrepresentation and Why They Matter

Types of Misrepresentation and Why They Matter

A contract largely depends on the honesty and goodwill of those who have agreed to it. If a party to a contract makes a misrepresentation of fact without suffering any repercussions for that misrepresentation, then few people would feel comfortable binding themselves to that contract. Misrepresentation is an important concept in the contract laws of England, Wales, and certain other Commonwealth countries. There are three main types of misrepresentation : 

Below is a brief overview of each type and the remedies for them.

But first…

Before talking about the three types of misrepresentation , however, it’s important to first define what misrepresentation means in the context of contract law. A misrepresentation is an untrue statement of fact that induces a party to enter a contract. Furthermore, to pursue a claim against the person who made the misrepresentation , the claimant must show that he or she relied on the untrue statement of fact when deciding to enter the contract and that the misrepresentation led to damages to the claimant. An opinion, it is important to keep in mind, even if considered false, is not the same as a fact and generally does not figure in cases surrounding misrepresentation. With that in mind, it’s time to look at the three types of misrepresentation .  

Misrepresentation and Why They Matter

Fraudulent misrepresentation  

Fraudulent misrepresentation is very serious. Fraudulent misrepresentation occurs when a party to a contract knowingly makes an untrue statement of fact which induces the other party to enter that contract. Fraudulent misrepresentation also occurs when the party either does not believe the truth of his or her statement of fact or is reckless as regards its truth. A claimant who has been the victim of alleged fraudulent misrepresentation can claim both rescission, which will set the contract aside, and damages.

Negligent misrepresentation

A party that is trying to induce another party to a contract has a duty to ensure that reasonable care is taken as regards the accuracy of any representations of fact that may lead to the latter party to enter the contract. If such reasonable care to ensure the truth of a statement is not taken, then the wronged party may be the victim of negligent misrepresentation . Negligent misrepresentation can also occur in some cases when a party makes a careless statement of fact or does not have sufficient reason for believing in that statement’s truth. As with fraudulent misrepresentation, claimants can pursue both damages and a rescission of the contract.  

Innocent misrepresentation  

In innocent misrepresentation , a misrepresentation that has induced a party into a contract has occurred, but the person making the misrepresentation had reasonable grounds for believing it was true at the time the representation was made. A claimant who has been the victim of innocent misrepresentation can still pursue damages, but he or she cannot pursue rescission. Again, to pursue damages it must be shown that the claimant suffered a loss because of the misrepresentation.

The three types of misrepresentation described above are fundamental to understanding contract law in England and many Commonwealth countries. Claims based on allegations of misrepresentation help ensure that contracts are ultimately honored and that unscrupulous or negligent behavior does not go unpunished. To learn more about misrepresentation, check out Misrepresentation vs. Fraud: What’s The Difference?  

This article contains general legal information but does not constitute professional legal advice for your particular situation. The Law Dictionary is not a law firm, and this page does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.

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Simple English definitions for legal terms

false representation

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A quick definition of false representation:

A false representation is when someone says or does something that is not true, usually with the intention of tricking someone else. This can include lying with words or actions, or not telling the whole truth. If the false representation is done on purpose and with the intention of causing harm, it is called fraudulent misrepresentation . If it is done by accident or without knowing it is false, it is called innocent misrepresentation . A material misrepresentation is one that is important enough to affect someone's decision to agree to something. Negligent misrepresentation is when someone makes a false statement without taking enough care to make sure it is true.

A more thorough explanation:

False representation is when someone makes a false or misleading statement about something with the intention to deceive. This can include spoken or written words, as well as any other conduct that is a false assertion.

For example, if a car salesman tells a customer that a car has never been in an accident when it actually has, that would be a false representation. The salesman is making a false statement with the intention to deceive the customer into buying the car.

There are different types of false representation. Fraudulent misrepresentation is when someone makes a false statement that they know is false or don't care if it's true or false, and they intend to deceive someone into relying on it. Innocent misrepresentation is when someone makes a false statement but doesn't know it's false. Material misrepresentation is a false statement that is likely to induce someone to agree to something or that the maker knows is likely to induce the recipient to agree to something.

Overall, false representation is a serious issue because it can lead to people making decisions based on false information , which can have negative consequences.

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Fraud by false representation is when someone dishonestly makes an untrue or misleading representation with the intention of making a gain for himself or causing loss to another.

Fraud solicitors London

If you have been charged with fraud by false representation, or you are currently released under investigation , please contact us at Ashmans Solicitors. Our specialist fraud solicitors can represent you throughout proceedings, securing a positive outcome on your behalf. We are available to take your call 24 hours a day, seven days a week.

What is fraud by false representation

Fraud is a criminal offence in the UK, as governed by the Fraud Act 2006. The legislation introduces three main ways of committing fraud – one of which is fraud by false representation. This is dealt with under Section 2 of the Act.

Fraud by false representation is when someone:

  • Dishonestly makes a false representation, and he/she
  • Knows that the representation is (or might be) untrue or misleading, and he/she
  • Does so with the intention of making a gain for himself/herself, or to cause a loss to another, or expose another to a risk of loss

The court is not concerned as to whether a gain or loss actually occurred. If the defendant intended to bring about either scenario, the charge of fraud by false representation can be upheld.

Examples of fraud by false representation

There are various actions that might amount to fraud by false representation. Really, it is any situation in which false statements are made for your own advantage, or to cause another party loss. Examples include:

  • Exaggerating your income on a mortgage application form
  • Falsifying details to obtain a credit card
  • Selling assets that are not yours to sell, or that do not exist
  • Claiming for costs that were never incurred

What are the penalties for fraud by false representation?

Fraud is considered a serious offence in the UK. Being convicted of fraud by false representation carries a maximum sentence of 10 years in prison and a fine. However, the maximum sentence is only handed out in the most serious of cases. It is possible for minor charges can be dealt with on a summary basis, at the Magistrates Court.

There may also be other consequences of a conviction. Most notably, the authorities may pursue Proceeds of Crime Act proceedings against anyone convicted under the Fraud Act 2006. This could lead to a  Confiscation Order , whereby you are tasked with repaying any money made by way of fraudulent activity.

What happens if I’m investigated for fraud by false representation?

You might not realise you are being investigated for fraud by false representation until you are invited for a police interview. In the meantime, you may be placed under surveillance. The police can also get a search warrant for your home and your workplace.

If you are asked to attend the police station for an interview, you should ask a fraud solicitor to accompany you. You will be asked questions about your activity. These can be difficult to answer, as the police may withhold certain information from you, in the hope that you incriminate yourself. A fraud solicitor can guide you through police interviews, ensuring you do not accidentally damage your case.

You may also be subject to a  Restraint Order . This effectively freezes your assets, pending the outcome of the investigation. This can make life very difficult, particularly as fraud investigations can continue for months, even years. A fraud solicitor can apply to the court to vary the order, alleviating the pressure on you and your family (and, if applicable, your business).

If the police decide there are sufficient grounds to lay charges, your case will be passed to the Crown Prosecution Service (CPS). A date will be set for a hearing at a Magistrates Court. Most cases then proceed to the Crown Court where there will either be a trial (if you plead not guilty) or a sentencing hearing (if you plead guilty).

Defending allegations of fraud by false representation

Fraud solicitors can help you defend allegations of fraud by false representation. There are times when the authorities mistakenly accuse people of fraud. These errors need to be brought to light as soon as possible, thereby quashing the prosecution’s case. Doing so can be a long and complicated process, often necessitating the help of a forensic accountant.

This is precisely what happened in the case of R –v- CV , in which our client was accused of claiming transport goods on behalf of his company. The prosecution argued that another company had in fact completed the work. We analysed our client’s company records, a painstaking exercise that resulted in us creating a comprehensive defence bundle. Thanks to this analysis, the judge ruled in our client’s favour and one of the charges against him was dropped.

As this case goes to show, defending allegations of fraud by false representation are possible. However, it takes a specialist fraud solicitor to succeed.

Speak to our fraud solicitors London

Fraud by false representation is one of the most common types of fraud. If such allegations have been made against you, you need a fraud solicitor on your side. We will work alongside some of the country’s leading barristers and forensic experts to overturn the charges. We will also address any other consequences that sometimes arise during fraud proceedings, such as Restraint Orders and Confiscation Orders.

Contact our fraud solicitors now

Accused of fraud by false representation ? For a free initial enquiry, call us now on 0333 009 6275. We are available 24 hours a day, 7 days a week. Accused of Benefit Fraud ?

You can also email us on [email protected] or complete our Free Online Enquiry Form and we will contact you.

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Example sentences false representation

She admitted two charges of fraud by false representation and asked for 17 others to be taken into consideration at Portsmouth crown court.
She admitted pretending to be a medical practitioner and fraud by false representation .
Last month she was jailed for eight months after admitting six charges of false representation .
He denies four charges of obtaining money by deception and false representation .
She denies misconduct in public office and false representation .

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COMMENTS

  1. Meaning of false representation in English

    FALSE REPRESENTATION definition: the crime of giving false information to someone, especially in order to make money: . Learn more.

  2. False representation Definition & Meaning

    noun. : an untrue or incorrect representation regarding a material fact that is made with knowledge or belief of its inaccuracy see also misrepresentation.

  3. FALSE REPRESENTATION definition and meaning

    FALSE REPRESENTATION definition | Meaning, pronunciation, translations and examples

  4. Misrepresentation

    We therefore hold that in order to maintain an action for damages for false representation, the plaintiff must allege and prove by a preponderance of the evidence the following elements: (1) that a representation was made; (2) that the representation was false; (3) that, when made, the representation was known to be false, or made recklessly without knowledge of its truth and as a positive ...

  5. False Representation

    False representation refers to a deceptive assertion or claim made by an individual that is untrue and intended to mislead another party. This concept is crucial in understanding fraud, as it encompasses the various ways individuals can manipulate information or present false facts to gain something of value, such as money or property. False representation can take many forms, including verbal ...

  6. Misrepresentation Definition & Meaning

    noun. mis· rep· re· sen· ta· tion mis-ˌre-pri-ˌzen-ˈtā-shən, -zən-. : an intentionally or sometimes negligently false representation made verbally, by conduct, or sometimes by nondisclosure or concealment and often for the purpose of deceiving, defrauding, or causing another to rely on it detrimentally. also : an act or instance of ...

  7. false representation Definition, Meaning & Usage

    Definition of "false representation" The act of knowingly or deliberately presenting an inaccurate or mistaken statement about a significant fact ; How to use "false representation" in a sentence. The salesperson made a false representation about the car's mileage to convince the buyer.

  8. False Representation Law and Legal Definition

    False representation means a false or wrongful representation regarding a material fact with the knowledge or belief of its inaccuracy. False representation depends upon the peculiar circumstances and conditions involved in each case. False representation is the most common foundation for actions in fraud and deceit and for equitable relief on ...

  9. false representation

    false representation meaning, definition, what is false representation: the crime of obtaining money from someon...: Learn more. English. English English - Japanese English - Korean English - Spanish Japanese - English Spanish - English ... English. 日本語 Español ...

  10. PDF Common Law Fraudulent Misrepresentation and Negligent Misrepresentation

    1.2. ELEMENTS OF FRAUDULENT MISREPRESENTATION. Whether it is called common law fraud, fraudulent misrepresentation, or intentional misrepresentation, the ele-ments of the claim are the same. The first three elements largely address the defendant's conduct or state of mind, and the last two address the plaintiff's.

  11. What does False representation mean ?

    A lie told to persuade someone to enter into a contract. Definition of False representation. phrase - Lying in a statement to persuade someone to enter a contract.Understand legal terms relevant to your case here.

  12. Meaning of false representation in English

    FALSE REPRESENTATION meaning: the crime of giving false information to someone, especially in order to make money: . Learn more.

  13. Misrepresent Definition & Meaning

    The meaning of MISREPRESENT is to give a false or misleading representation of usually with an intent to deceive or be unfair. How to use misrepresent in a sentence.

  14. Misrepresentation

    In common law jurisdictions, a misrepresentation is a false or misleading [1] statement of fact made during negotiations by one party to another, the statement then inducing that other party to enter into a contract. [2] [3] The misled party may normally rescind the contract, and sometimes may be awarded damages as well (or instead of rescission).The law of misrepresentation is an amalgam of ...

  15. Misrepresentation

    Misrepresentation. An untrue statement of fact or law made by Party A (or its agent) to Party B, which induces Party B to enter a contract with Party A thereby causing Party B loss. An action for misrepresentation can be brought in respect of a misrepresentation of fact or law. There are three types of misrepresentation: Fraudulent ...

  16. Fraudulent Misrepresentation: Civil Fraud Law & Scams: Legal Claims

    Dishonest Intention - in civil law, fraud doesn't necessarily require a deliberate dishonesty, or a dishonest intention. The civil law sets its own standard for fraud and actionable dishonesty, and what isn't. The tort of deceit and fraudulent misrepresentation requires a fraudulent intention on the part of the maker of a statement.

  17. 3 Types of Misrepresentation and Why They Matter

    Fraudulent. Negligent. Innocent. Below is a brief overview of each type and the remedies for them. But first…. Before talking about the three types of misrepresentation, however, it's important to first define what misrepresentation means in the context of contract law. A misrepresentation is an untrue statement of fact that induces a party ...

  18. false representation definition · LSData

    A quick definition of false representation: A false representation is when someone says or does something that is not true, usually with the intention of tricking someone else. This can include lying with words or actions, or not telling the whole truth. If the false representation is done on purpose and with the intention of causing harm, it ...

  19. False representation Definition

    More Definitions of False representation. False representation means an untrue or incorrect representation regarding a material fact that is made with knowledge or belief of its inaccuracy, including but not limited to the failure to report changes in income, assets, household members, employment or other relevant circumstances. Sample 1 Sample 2.

  20. What is Fraud by False Representation?

    Fraud by false representation is when someone: Dishonestly makes a false representation, and he/she. Knows that the representation is (or might be) untrue or misleading, and he/she. Does so with the intention of making a gain for himself/herself, or to cause a loss to another, or expose another to a risk of loss.

  21. FALSE REPRESENTATION definition in American English

    FALSE REPRESENTATION meaning | Definition, pronunciation, translations and examples in American English. ... She admitted two charges of fraud by false representation and asked for 17 others to be taken into consideration at Portsmouth crown court. The Sun (2016) ... (Unregistered users can only access the International English interface for ...

  22. false representation

    From Longman Business Dictionary false representation ˌfalse represenˈtation noun [countable, uncountable] LAW the crime of obtaining money from someone by deceiving them, especially by pretending that something is true when it is not SYN FRAUD If an advertising campaign violates the law, the advertiser faces civil penalties for false representation. The company was accused of a lack of duty ...

  23. REPRESENTATION

    REPRESENTATION definition: 1. a person or organization that speaks, acts, or is present officially for someone else: 2. the…. Learn more.

  24. FALSE EYELASHES

    FALSE EYELASHES definition: 1. artificial hairs that you stick to the skin around your eyes to make your eyelashes (= the short…. Learn more.