In the business world, a lot depends on the creation of and adherence to contracts and other agreements. These contracts can pertain to just about anything, from funding processes and supply chain functionality to employment terms and work processes. Of course, there is often a lot of negotiation that occurs before these agreements are formalized, but sometimes false promises are made or important facts are inflated in order to close the deal. When this happens, legal action may be justified.

Fraudulent misrepresentation is all too common in the business realm. This illegal act occurs when a false representation is either knowingly or recklessly made with the intention of another party relying on it to their detriment, thereby resulting in financial harm. This type of misrepresentation can occur in a number of ways and in a variety of contexts. For example, a supplier may flat out lie about having access to highly desirable goods in order to secure a contract. This type of intentional act will qualify as fraudulent misrepresentation so long as detrimental reliance and financial harm can be shown.

But what instances where a party unknowingly makes a misleading or inaccurate statement? These cases are a little tougher to decipher. First, one must consider whether the misrepresentation had a material effect on the contract, meaning that it played a major role in the other party agreeing to the contract. Then, one must closely analyze the intent. Even if the statement was made without actual knowledge of its falsehood, if such statement was made recklessly, then fraudulent misrepresentation may be found. If, on the other hand, the statement was negligently made, or the mistake was innocent in nature, then legal action will not be justified.

There is a fine line between what is fraudulent and what is not in these matters. As a result, business litigation often results. Those who find themselves facing these issues may find it in their best interests to work closely with a legal professional who can help them persuasively present their side of the case.