What Is Fraudulent Misrepresentation? (2025 Updated)

No matter what kind of activities your business is engaging in, it’s likely you’ll be entering into a contract to protect yourself from key risks. So, when entering into contracts, it’s important for all parties involved to be as transparent with each other as possible.

What you say outside of the contract can be just as important as what is written within it – after all, one party may end up signing a contract based on representations made verbally or in writing, even if they turn out not to be true. When this happens, it can amount to fraudulent misrepresentation, a risk you certainly want to avoid. Keep reading to learn more.

What Is Misrepresentation?

Misrepresentation occurs when a statement or omission creates a false impression about a material fact. Essentially, it involves a misstatement or the deliberate failure to disclose important information – in short, it’s a lie that may induce another party to enter a contract.

Example Charlie is selling clothing on an online marketplace. A potential buyer asks Charlie if the garments are made from 100% organic cotton. Although Charlie isn’t certain, he replies in the affirmative to secure the sale. In doing so, Charlie has misrepresented the nature of the items.

What Is Fraudulent Misrepresentation?

Fraudulent misrepresentation can occur during the formation of a contractual relationship. One party may deliberately make a false statement or omit key information in order to induce the other party to sign the contract. This conduct is not only unethical but is also a serious offence under Australian law in 2025.

This offence remains enforceable under Australian law. It is important to note that statements made outside the written contract can be just as binding if they were a deciding factor in influencing the agreement.

However, it’s common to confuse misrepresentation with misleading and deceptive conduct. While they are similar, they are distinct concepts – with misrepresentation arising under common law and misleading and deceptive conduct being regulated by legislation such as the Australian Consumer Law (ACL). For more insights on avoiding these pitfalls, check out our guide on how your business can avoid misleading or deceptive conduct.

Misrepresentation Vs Misleading And Deceptive Conduct

Misleading and deceptive conduct is most commonly seen in consumer law, where a seller misleads a buyer. Under section 18 of the ACL, such conduct is strictly prohibited. Examples include:

• False statements of fact
• Omissions that hide the true nature of a product or service
• Misleading body language or visual cues
• Inaccurate predictions about future outcomes

While this can appear similar to misrepresentation, the key difference lies in their origins: misrepresentation is rooted in common law, whereas misleading and deceptive conduct is a statutory offence enforceable under the ACL. In 2025, many businesses continue to rely on the ACL when addressing these issues, especially as its broad wording provides wider protection for consumers.

It’s also important to remember that the ACL applies primarily to ‘consumer contracts’ – those where the price of goods or services typically does not exceed $40,000 (and where the goods are not intended for resale). When these conditions aren’t met, misrepresentation under common law becomes the more relevant framework.

The key takeaway here is that misrepresentation provides a pathway for redress where the ACL’s protections do not apply. Understanding how both of these legal concepts work is essential in managing your business’s contractual risks.

Fraudulent Misrepresentation In Contract Law

Since fraudulent misrepresentation is made outside the written terms of a contract, it cannot itself constitute a breach of the contract. However, this does not make it legal. If a party is induced to sign an agreement by fraudulent misrepresentation, the defrauded party may have the right to seek damages or even rescind the contract entirely.

To assess whether fraudulent misrepresentation has occurred, courts in 2025 typically examine whether the following elements are satisfied:

• The misrepresentation must be a statement of fact.
• It must be an active, positive statement (unless a duty of disclosure applies).
• The deceived party relied on that statement when signing the contract.

In effect, the court will consider whether a reasonable person in the same position would have been misled by the statement.

Remedies For Fraudulent Misrepresentation

The remedies available for fraudulent misrepresentation include rescinding the contract or seeking damages. Rescission effectively cancels the contract, restoring both parties to their pre-contractual positions – as if the agreement had never been entered into.

However, rescission may not fully address the losses incurred by the aggrieved party. In such cases, seeking damages is an important remedy. In instances where fraudulent misrepresentation has also involved breaches of the Australian Consumer Law, especially under section 18, courts in 2025 have been known to award higher damages to compensate for the broader impact of the deception.

How Can I Avoid Fraudulent Misrepresentation?

It’s vital to take proactive steps to avoid becoming either the instigator or the victim of fraudulent misrepresentation. Courts offer remedies, but pursuing legal action can be lengthy and costly. The best approach is prevention.

One key measure is ensuring that all agreed terms are clearly detailed within your contracts. Avoid relying on external statements or verbal assurances that are not documented. For additional tips on safeguarding your agreements, read our article on how to sign a contract in today’s business environment.

Remember, being transparent and forthright in all communications with customers, clients, and business partners is crucial. Not only does this protect your business’s finances, but it also preserves your reputation in the competitive market of 2025.

If you suspect that misrepresentation may have influenced a contractual agreement, our experts can guide you through the legal options, including the possibility of contract redrafting and other remedies available under current law.

Should I Have My Contract Reviewed?

It is essential to have your contracts reviewed by a legal professional to keep your business protected. An expert in contracts can ensure that the terms accurately reflect your intentions and protect you against potential misrepresentations. If necessary, you can have them redrafted to cover any grey areas. For further guidance, consider our brief on choosing the right small business lawyer to support your needs.

Our friendly team of contract lawyers are happy to have a chat with you – reach out today for a free, no-obligations consultation!

Additional Considerations in 2025

The legal landscape in Australia continues to evolve, and in 2025 courts are taking an even firmer stance on transparency and fairness in contractual negotiations. Updated legislation and enhanced consumer protections mean that ensuring all representations are accurate and documented is more critical than ever. Reviewing your contractual documents not only helps you avoid fraudulent misrepresentation but also ensures you remain compliant with the latest legal standards.

Digital communications now play a larger role in forming contractual expectations. Courts have started to consider emails, texts, and even social media interactions as part of the negotiation process. This reinforces the importance of maintaining clear, factual records and ensuring that all statements made during discussions are corroborated in the written contract. For a comprehensive overview of modern contractual practices, explore our guide on online business legals.

Key Takeaways

Fraudulent misrepresentation is not only detrimental to your business – it’s also illegal. Here’s a quick summary of what we’ve covered:

• Misrepresentation occurs when a false statement or omission induces a party into a contract.
• Fraudulent misrepresentation involves deliberate falsehoods intended to secure contractual agreement.
• Misleading and deceptive conduct, governed by the ACL, primarily applies to consumer contracts.
• Although fraudulent misrepresentation cannot constitute a breach of contract per se, courts can grant damages or rescind the contract.
• In order to avoid fraudulent misrepresentation, ensure all terms are documented and seek regular contract reviews by legal professionals.

If you would like a consultation regarding fraudulent misrepresentation or any other contractual concerns, please call 1800 730 617 or email us at team@sprintlaw.com.au for a free, no-obligations chat.

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