Material misrepresentation is an act related to the intended concealment or fabrication of an important fact which, if known to the person concerned, could significantly affect the basis of the contract and the final decision of that person. To be significant in consequences (J. Davis 2012, p. 168):
- misrepresentation must be material,
- the deceit cannot be temporary and negligible,
- the plaintiff must prove that the damage to his company is the consequence of fraud that is provided for and considered by the defendant.
For instance, basely claiming by one trader that rival trader’s goods are overpriced can be damaging but at first sight it is not a misrepresentation that bears in passing-off action. Misrepresentation can be explicit or implied. Explicit misrepresentation is rare. Relevant misrepresentation is connected with misleading the public by convincing them that the defendant's goods or activities are in some way related to the plaintiff's activities, which may cause losses to his business (J. Davis 2012, p. 168).
Concluding a contract
To perceive misrepresentation as actionable, it must be significant enough. By this it means that it should have a proper impact on reasonable person taking the decision whether or not to sign a contract. In order to designate the level of the urge, courts uses the applicable and objective test. As result, even if the defendant does not perceive misrepresentation as material, it can be considered as such. This test consists in studying state of representee’s mind in reference to fraudulent asseveration at the time of entering into contract. It is required to state that the person has been induced to conclude a contract (P. Richards 2007, p. 221).
Material misrepresentation and confusion
The main difference between material misrepresentation and confusion amounts to determining whether this commotion is intended and clearly detrimental to the plaintiff's business. Confusion does not necessarily mean a significant misleading. An example of this kind of dilemma occurred in case of HFC Bank and HSBC Bank.
The claimant leaded a HFC bank, which tried to attract customers by offering a number of services as retail agreements, credit brokers, and credit card business. Simultaneously, there was a Midland Bank, belonging to HSBC Holdings. At some point, Midland Bank changed the brand to HSBC Bank.
According to the court, if using HSBC were to determine material misrepresentation, the claimant would have to reveal that it had led to perceiving by the current and potential customers this HSBC brand as HFC brand.
The court considered that even if for some customers it is important to identify with the concrete Bank, there are no circumstances in which they would enter into definite transaction with this Bank without feeling of distraction caused by such confusion. To sum up, from the point of view of law, there was a preliminary misrepresentation but it was not material (J. Davis 2012, p. 169).
- Cartwright J. (2012), Misrepresentation, Mistake and Non-Disclosure, Sweet&Maxwell, London, p. 18, 40, 63
- Davis J. (2012), Intellectual Property Law, Intellectual Property Law. Oxford University Press, Oxford, p. 169
- Richards P. (2007), Law of Contract, Law of Contract, Pearson Education Limited, London, p. 221
Author: Sonia Natkaniec