Written by Jeremy Boyle Last Updated: 13 November, 2025Fraudulent misrepresentation is one of the most serious forms of misrepresentation in contract law. When this happens, the wronged party may be entitled to rescind the contract and claim damages for the losses they have suffered.
In this guide, we’ll explain what fraudulent misrepresentation is, how it differs from other forms, and how to make or defend a claim.
- What is fraudulent misrepresentation?
- How to prove fraudulent misrepresentation
- Difference between fraudulent and negligent misrepresentation
- Examples of fraudulent misrepresentation
- Consequences of fraudulent misrepresentation
- Director's liability and fraudulent misrepresentation
- Making a claim for fraudulent misrepresentation
- How to defend a claim for fraudulent misrepresentation
- FAQ’s about fraudulent misrepresentation
- Contact our fraudulent misrepresentation solicitors today
What is fraudulent misrepresentation?
Fraudulent misrepresentation occurs when one party deliberately makes a false statement, knowing it to be untrue, or recklessly, to persuade another party to enter a contract.
While negligent and innocent misrepresentation are covered by the Misrepresentation Act 1967, fraudulent misrepresentation is still governed by common law, through what’s known as the tort of deceit. In simple terms, that means the rules have been developed by judges over time, rather than set out in legislation.
Key facts about fraudulent misrepresentation:
- The landmark case of Derry v Peek (1889) established the modern test for fraud and remains the foundation of the law today
- Fraudulent misrepresentation can give rise to both civil and, in some cases, criminal liability under the Fraud Act 2006.
How to prove fraudulent misrepresentation
- That there was a false representation of fact
- The statement was made knowingly, without belief in its truth, or recklessly
- The false statement was made with the intention of persuading the other party to enter into the contract
- The claimant relied on the false statement and suffered loss as a result.
Difference between fraudulent and negligent misrepresentation
Fraudulent misrepresentation involves intentional deceit, whereas negligent misrepresentation involves careless error.
| Fraudulent misrepresentation | Negligent misrepresentation | |
| Intent | The false statement is made knowingly, without belief in its truth, or recklessly as to whether it is true or false. The person making it intends to deceive or is indifferent to the truth. | The false statement is made carelessly, without taking reasonable steps to verify accuracy. There is no intent to deceive. |
| Burden of proof | The claimant must prove, on the balance of probabilities, that the statement was made fraudulently — showing dishonesty or reckless disregard for the truth. | The defendant must prove they had reasonable grounds to believe the statement was true. |
| Remedy | The contract is voidable, allowing the innocent party to rescind it and claim damages to cover all losses directly caused by the fraud, even if they were not foreseeable at the time of the contract. | The contract is voidable. However, if the other side disputes the claim or refuses to accept the cancellation, the claimant may need to ask the court to confirm rescission or to award damages instead. Damages can be awarded on a similar basis to fraud; however, compensation is usually more limited. |
| Example | A seller deliberately hides major defects in a business sale and provides falsified accounts to increase the sale price. | A seller provides financial figures they believe are accurate but fails to verify them, and these are later found to be inaccurate. |
Examples of fraudulent misrepresentation
Below are a few examples illustrating how courts approach fraudulent misrepresentation cases.
London Capital & Finance PLC -v- Michael Andrew Thomson
In November 2024, the Court found that London Capital & Finance plc (LCF) had misled investors by falsely representing how their money would be used. In reality, funds were diverted through a web of interconnected companies, described by the judge as a “Ponzi-style operation.”
Autonomy plc / Hewlett-Packard Enterprise (2025)
After more than a decade of litigation, the High Court ordered the estate of Autonomy founder Mike Lynch to pay Hewlett-Packard Enterprise over £700 million in damages for fraudulent misrepresentation.
The judge ruled that Autonomy’s financial statements had been deliberately manipulated to inflate its value and mislead investors before HP’s $11 billion takeover. Although the Court found HP’s claimed losses were exaggerated, it concluded that the company had overpaid by nearly 10% due to the fraud.
Wirecard AG scandal (2020)
The collapse of German payments firm Wirecard revealed one of Europe’s largest corporate frauds. The company admitted that €1.9 billion in cash reported on its balance sheet did not exist.
Executives had knowingly falsified financial records and misled investors for years, amounting to large-scale fraudulent misrepresentation. The scandal prompted EU-wide reforms to auditing and corporate governance.
Consequences of fraudulent misrepresentation
Because fraud strikes at the heart of trust and fair dealing, the courts take a strict approach to remedying it.
- The innocent party can ask the Court to rescind the contract — effectively cancelling it and restoring both sides to their pre-contract position
- The claimant can also claim damages to cover all losses directly flowing from the fraud, whether or not they were foreseeable at the time of contracting. This includes both financial and consequential losses, such as loss of profits, wasted expenditure, and reputational harm.
- In the most serious cases, fraudulent misrepresentation can also amount to fraud by false representation. This is a criminal offence, punishable by up to 10 years’ imprisonment, an unlimited fine, or both.
Although the law takes a hard line against fraud, there are still practical limits on what a claimant can recover.
- Rescission is not automatic. The Court has discretion and may refuse it where unwinding the contract would be unfair or impossible.
- A claimant who waits too long to act or continues to benefit from the contract after learning of the fraud may be treated as having affirmed it.
- While damages for deceit are not reduced for contributory negligence, a claimant’s own conduct can affect credibility and the overall assessment of loss.
Director's liability and fraudulent misrepresentation
Company directors have specific duties to act honestly and in good faith. When a director makes a fraudulent misrepresentation, those duties are not only breached, but may also amount to personal wrongdoing.
If a director makes a fraudulent misrepresentation, they may face:
- Personal liability for deceit: A director can be sued in their own name, even if the company made the contract.
- Director disqualification: Under the CDDA 1986, directors can face up to 15 years where a person’s behaviour in managing a company makes them unfit.
- Potential criminal prosecution for fraud: Conviction can result in imprisonment for up to 10 years, an unlimited fine, or both.
Making a claim for fraudulent misrepresentation
If you believe you’ve been induced into a contract by fraud, you may have grounds to bring a claim for fraudulent misrepresentation.
Before issuing a claim
- Gather evidence: Collect written statements, contracts, emails, financial documents, or promotional materials that contain or refer to the alleged misrepresentation. Evidence is critical.
- Assess reliance and loss: You must be able to show that you relied on the false statement when entering into the contract and that this caused you a measurable loss. Quantify the losses caused by the deceit.
- Seek legal advice early: A solicitor experienced in fraud disputes can help assess whether there is sufficient evidence to proceed, or whether another route may be more appropriate (e.g. breach of contract or contract disputes).
Starting formal proceedings
- Consider pre-action communication: In most cases, you’ll be expected to send a Letter of Claim outlining the allegations and the remedy you are seeking.
- Evaluate settlement or alternative resolution: In some cases, reaching an agreement may preserve business relationships or avoid adverse publicity.
Proceed to Court: If settlement fails or the matter is serious enough to be pursued formally, a claim for fraudulent misrepresentation is typically brought.
- Interim steps: In severe cases, your solicitor may also apply for urgent interim remedies, such as injunctions and freezing orders.
How to defend a claim for fraudulent misrepresentation
Defending a fraudulent misrepresentation claim requires proving that:
- The statement was true, or made with honest belief in its truth
- There was no intention to deceive or mislead
- The claimant did not rely on the alleged misrepresentation
- The claimant suffered no loss, or that other factors caused the loss.
Where appropriate, you might also argue that the contract included a valid clause, limiting reliance on pre-contract statements. However, such clauses must be fair and reasonable to be enforceable.
Given the reputational and financial risks associated with fraud allegations, early legal advice is essential.
FAQ’s about fraudulent misrepresentation
In contract law, fraudulent misrepresentation occurs when one party makes a deliberate and false statement of fact, intending to deceive the other into entering into a contract. The misled party may then rescind the contract and claim damages for losses caused by the deceit.
A material misrepresentation is a false statement significant enough to influence a party’s decision to enter a contract. In other words, it must be something that a reasonable person would consider important when deciding whether to proceed.
Fraudulent misrepresentation can be a crime as it may constitute fraud by false representation under the Fraud Act 2006. This is a criminal offence punishable by imprisonment or fines. However, most cases are pursued as civil claims.
Yes. Fraudulent misrepresentation is a tort – a type of civil wrong commonly referred to as the tort of deceit. It occurs when someone knowingly or recklessly makes a false statement with the intention of deceiving another person, who relies on it and suffers a loss as a result.
In civil law, the penalty for fraudulent misrepresentation typically includes rescission of the contract and compensation for all losses incurred. In criminal cases, penalties can include imprisonment for up to 10 years.
Non-fraudulent misrepresentation includes negligent and innocent misrepresentations – where false statements are made carelessly or without intent to deceive. These still allow the wronged party to rescind the contract, though damages are usually lower.
To sue for fraudulent misrepresentation, you must file a claim in the civil courts. You’ll need strong documentary evidence and legal advice before proceeding.
Contact our fraudulent misrepresentation solicitors today
- Review your situation and evidence: Examining what was said or promised, how it was misleading, and whether there is proof of dishonesty or recklessness.
- Advise on your legal options: Explaining whether rescission, damages, or another remedy is available, and what outcome is most realistic.
- Pursue or defend proceedings: Representing you through negotiations, court hearings, or settlement discussions.
- Support you throughout the process: Providing clear, practical advice from the first consultation to resolution.
