Difference Between Fraud and Misrepresentation

The main difference between fraud and misrepresentation is that fraud is an intentional misrepresentation of a fact whereas misrepresentation is the clear misconception of an error as a true statement.

Fraud versus misrepresentation

Fraud is a false statement made by one party to the other party to enter into the contract. Conversely, misrepresentation causes one party to believe that an erroneous account is true. Fraud is done with the ambition to deceive others; on the other hand, misrepresentation is creating a false statement while it is believed to be accurate, and that does not anticipate misleading the other party to the contract.

Fraud is the act of deception intentionally done by one party to get another party to sign the contract; On the other hand, misrepresentation is the representation of a wrong statement, made innocently so that another party will accept the agreement. Fraud is committed intentionally and knowingly, while misrepresentation is an unintentional and unknown act of considering a false statement to be correct.

Any form of fraud is more dangerous than any type of negligence or misrepresentation. Fraud involves the intentional misrepresentation and fabrication of material facts to deceive and harm any business or any company, while misrepresentation is not as intentional as fraud, misrepresentation has the negligence factor more prominent than intentional planning to harm to others.

Fraud is defined as the intentional or willful communication of false information to obtain the consent of another party, while misrepresentation is the unintentional communication of false data or facts. Therefore, we can say that if one party intentionally deceives another, then it is a fraud. However, if false or fabricated information is unknowingly or unintentionally communicated by one party, it is said to be a misrepresentation.

Comparison chart

What is fraud?

Willingly or knowingly communicating false information to gain people’s consent is called fraud. When a person knowingly or intentionally deceives other people to gain their benefit by hook or by crook, this act is called misrepresentation. The person knows the material facts but misrepresents them to obtain the consent of others. In fraud, a person makes a promise but does not intend to keep it. The only objective of a fraudulent person is to achieve his objectives by trampling on the head of any person.

A deceptive act by one party to influence another to enter into a contract is called fraud, which is a conscious effort to make others suffer and be influenced. A fraudulent party makes a false statement to another party whose sole purpose is to induce other parties to enter into the contract. The fraudulent person obligates the affected party not to sue the fraudulent person for damages, but may violate the contract. The defrauding party knows the truth but consciously and deliberately makes the false representation to the other party to get them to enter into the contract.

The aggrieved party believes the statement as truthful and suffers in return, taking much damage and loss. After being manipulated, it is up to the injured party to sue the fraud party for the fraud or make them pay for the injuries and cancel the contract. Example : Taking a loan from a person without intending to pay it back is an example of fraud.

What is misrepresentation?

The act of false communication of facts carried out unconsciously or innocently, without a sense of betrayal, is called misrepresentation. If there is an intentional false communication of events to obtain another party’s consent to terminate a contract, then it is called fraud. In misrepresentation, there is no intention to mislead anyone. The misrepresented person does not even know the truth for himself. He communicates false information considering it to be accurate and therefore considered fraud by other parties, but he is innocent.

The misrepresented information must be related to facts and must not be shown as an opinion. The fraudulent person is for the good of the law. He has to pay for the consequences, but a misrepresented person is released as she is not involved in intentionally deceiving others. A misrepresentation is usually made when there is no intent to lie. Still, a statement is carelessly made without having a reasonable reason to believe that it is true or not. In the case of a misrepresentation, it is considered unnecessary to know the credibility of the fact, and people mistake it for a fraud while misrepresenting themselves.

Example

Selling the damaged stuff i.e. TV at a high price without knowing it is broken is actually taken as a misrepresentation. Both the seller and the buyer do not know that the TV is already demolished, but when the buyer turns on the TV, he discovers that it is collapsed. Therefore, he considers the seller to be a fraud while he misrepresents it to him.

Key differences

1. Fraud is a conscious and deliberate misrepresentation of the facts, while deception is an actual representation that is false.
2. Fraud is related to lying and misleading others to enter into the contract, but misrepresentation is the full statement of fact by one party, believing it to be true.
3. The will commits fraud by deceiving and manipulating others, while misrepresentation is done through sheer ignorance or negligence.
4. When a false statement is made knowing it to be inaccurate, it is called fraud, while when a false statement is made without knowing it to be incorrect, it is called misrepresentation.
5. In fraud, the party reporting the information knows the truth; however, in the misrepresentation, the party that makes the representation does not even know the fact.
6. In fraud, the affected party can claim for the damage or loss suffered, on the other hand, in misrepresentation, the injured party cannot claim damages for any damage or loss suffered.
7. There is a strong intention to lie to others and fraudulently conceal facts, while there is no intentional or intentional ambition to mislead or harm others.
8. The fraudulent person is punished according to the law, while the misrepresented person is not punished because he has no intention of deceiving anyone.
9. Fraud is an act of dishonesty, while misrepresentation is an act of error and negligence.

Final Thought

Fraud is a conscious and willful act of deceiving others, while misrepresentation is an unintentional act. In deception, one party deceives the other party by knowing the truth, but in distortion, both parties are influenced by believing the false information to be true.