Governed by well-established principles under both business law and contract law, fraudulent misrepresentation can be addressed with legal remedies such as rescission of the contract, damages, or both. If you have encountered fraudulent misrepresentation as a business owner, a skilled and proven Pittsburgh attorney can help protect the legal rights of your business.

Legal Definition of Fraudulent Misrepresentation 

Fraudulent misrepresentation occurs when one party makes a false statement of fact, intending to deceive another party, and the deceived party relies on that statement to their detriment. 

Under Pennsylvania Statute 42 Pa. C.S. § 5524(7), the time limit for bringing claims of fraud (including fraudulent misrepresentation) under the state’s statute of limitations is two years from the discovery of fraud. 

In a case of fraudulent misrepresentation, the injured party may seek both compensatory and punitive damages as fraudulent intent elevates the severity of the misconduct. In this context: 

• Compensatory Damages: These are intended to reimburse the injured party for the actual losses they suffered as a result of the fraud. This can include financial losses or expenses directly caused by the misrepresentation. The goal is to restore the injured party to the position they would have been in if the fraud had not occurred.
• Punitive Damages: These damages are designed to punish the wrongdoer for their fraudulent conduct and to deter similar behavior in the future. These are also known as exemplary damages, which are awarded in cases where the defendant's actions were particularly malicious or egregious.

Notably, the courts view fraudulent misrepresentation as a serious violation, which may also lead to the potential rescission of contracts and additional legal consequences for the offending party.

Other Types of Misrepresentation in Business

Misrepresentation can take various forms in business dealings. Apart from fraudulent misrepresentation, two other common forms are negligent and innocent misrepresentation.

Negligent Misrepresentation

Negligent misrepresentation occurs when a party makes a false statement without exercising reasonable care to ensure its accuracy. In this case, the person making the statement may not intend to deceive, but their failure to verify the truthfulness of their claims leads to harm for the other party. Businesses and individuals can pursue legal action if they suffer damages as a result of reliance on a negligently made statement.

Innocent Misrepresentation

Innocent misrepresentation occurs when one party makes a false statement but genuinely believes it to be true. There is no intent to deceive, nor is there negligence involved, but the misrepresentation still results in the other party suffering some form of harm. Although innocent, this type of misrepresentation may still allow the affected party to seek rescission of the contract or other remedies.

Whether the misrepresentation is innocent, negligent, or fraudulent, each type has different legal implications, but all can disrupt business relationships and cause financial losses. You may be able to claim damages for any type of innocent, intentional, or reckless misrepresentation in business. 

Elements of Fraudulent Misrepresentation

To successfully prove a fraudulent misrepresentation claim, a plaintiff must establish the following elements:

• Representation was False: There must be a false statement of a material fact, or a failure to disclose important information. Material facts are those that are significant enough to influence the decision-making process of the other party.
• Knowledge of Falsity: The party making the representation must know that the statement is false or act with reckless disregard for the truth. This element establishes the intent to deceive (not an honest mistake).
• Intent to Induce Action: The false representation was made with the intent to deceive or induce the other party to take a specific action, such as signing a contract.
• Justifiable Reliance: The misled party must have reasonable grounds to rely on the false statement or omission when deciding to enter into the business transaction or contract.
• Plaintiff Suffered Harm: The party who relied on the fraudulent misrepresentation must have suffered actual harm or damages as a direct result of the false representation.

Fraudulent Misrepresentation in Business Law

Fraudulent misrepresentation in business law usually involves misstatements or omissions that impact the financial or operational health of a company. For example, a business may misrepresent the profitability of an enterprise to secure an investor or partner. Such fraudulent behavior can lead to civil litigation and criminal penalties in Pennsylvania.

Pennsylvania Business Law Statutes

While Pennsylvania does not have a specific statute dedicated exclusively to business misrepresentation, fraudulent practices may be prosecuted under general fraud statutes and consumer protection laws.

• Unfair Trade Practices and Consumer Protection Law (73 P.S. §§ 201-1 to 201-9.3): This law addresses fraudulent business practices and deceptive conduct, making it illegal for businesses to engage in false advertising, misrepresentation, or concealment of material facts during business transactions.

Fraudulent Misrepresentation in Contract Law

In contract law, fraudulent misrepresentation can render a contract voidable. If a party can prove that they were induced to enter into a contract based on false information, they may seek to void the agreement or recover damages. A common example of fraudulent misrepresentation in contract law involves making false statements about the terms of a contract, the value of goods or services, or the intentions of a party to perform the obligations of the contract.

Pennsylvania Contract Law Statutes

• Pennsylvania Consolidated Statutes Title 13, Uniform Commercial Code (UCC) - Sales (§ 2-313): The UCC governs sales contracts and includes provisions related to warranties and representations made during sales transactions. If a seller fraudulently misrepresents the quality or performance of a product, the buyer may have grounds to void the contract under the UCC.
• Pennsylvania Statute of Frauds (33 P.S. § 1): This statute requires that certain contracts, such as those involving the sale of goods over a certain value or real estate transactions, must be in writing. If a contract was induced by fraudulent misrepresentation, even verbal misrepresentations can lead to the contract being declared void or unenforceable.

Legal Consequences of Fraudulent Misrepresentation

The consequences of fraudulent misrepresentation can be severe in business and contract law. Contact a lawyer to pursue potential remedies for fraudulent misrepresentation in Pennsylvania, which include:

1. Rescission of the Contract: The court may declare the contract void, allowing the parties to return to their pre-contractual positions.
2. Compensatory Damages: The injured party may seek monetary damages for any financial losses incurred as a result of the fraudulent misrepresentation.
3. Punitive Damages: In cases where the fraud is particularly egregious, Pennsylvania courts may award punitive damages to punish the wrongdoer and deter future fraudulent conduct.
4. Equitable Relief: In some cases, the court may order specific performance, injunctions, or other equitable remedies to address the harm caused by the misrepresentation.

How Our Pittsburgh Business Attorney Can Help If You Face Fraudulent Misrepresentation

Fraudulent misrepresentation can severely impact your business, leading to financial losses, damaged reputations, and broken agreements. When you are the victim of such deceit, our experienced Pittsburgh business attorney Ryan D. Very, Esq. at Very Law can provide the strongest legal support you need to recover and protect your interests. 

Strategic Legal Guidance and Case Assessment

Attorney Ryan Very begins by thoroughly assessing the circumstances surrounding your case. He will review the specific facts to determine the nature of the fraudulent misrepresentation and how it has affected your business or contract. His evaluation will focus on proving the elements of fraudulent misrepresentation: a false representation, intent to deceive, reliance on the misrepresentation, and resulting harm or damages.

Depending on your case, attorney Very may recommend pursuing appropriate legal remedies, such as:

• Rescind the Contract: In some cases, it may be possible to void the contract and return the parties to their original positions.
• Seek Damages: If you have suffered financial harm, he can pursue compensation for direct losses and potential future earnings lost due to the fraud.
• Enforce the Contract on New Terms: If beneficial, the contract may be enforced with certain modifications to reflect fair terms.

Collecting and Analyzing Evidence 

To build a strong case, attorney Ryan Very and his legal team will collect the following types of evidence:

• Written Contracts or Agreements: To verify the terms and any fraudulent statements within the documents.
• Email and Text Correspondence: Communications showing false statements or omissions by the other party.
• Witness Testimonies: From employees, partners, or other relevant individuals who can confirm the misrepresentation.
• Financial Records: To demonstrate the financial losses suffered due to the fraudulent behavior.
• Marketing Materials or Business Presentations: Used to show false representations made to induce the agreement.

Aggressive Negotiations and Trial Readiness

Fraudulent misrepresentation claims may lead to contentious legal battles. Attorney Very is equipped to protect your interests, whether through negotiation or litigation. His primary goal is to resolve the dispute in your favor without unnecessary delay or cost.

• Negotiation: Attorney Very may first attempt to resolve the matter outside of court by negotiating directly with the other party. He will assert your legal rights as a partner or business owner, explaining the consequences of the fraud, including potential legal actions if the dispute is not settled fairly.
• Litigation: If negotiations fail or the other party refuses to settle in good faith, attorney Ryan Very is prepared to take the case to court. He will present solid evidence that demonstrates how the other party’s misrepresentation has harmed you. With his trial skills and experience, he will pursue the highest possible compensation for your losses.

To schedule your confidential consultation with our legal team, call us at 412-424-6199 or contact us online.