Enforcing Contracts in California: Recovering From Misrepresentation

October 26, 2012

Companies rise and fall based on the strength and reliability of their business dealings. In the past, many business owners created obligations and made promises based on a handshake. Now, deal-making is much more complicated.

With every transaction, there is still an element of trust when dealing with others -- an assumption that the other party is telling the truth. Unfortunately, that assumption may be unreliable, even when the parties have a contract laying out each other's responsibilities and duties.

If one party to a contract fails to hold up his or her part of the bargain, a breach of contract may have occurred, giving the aggrieved party the right to legal action. There are hundreds of ways breaches can occur and one of the most common is misrepresentation.

Misrepresentation can be:
-Making a false statement
-Withholding information which one has a duty to disclose
-Concealing a fact

In California, in order for a claim of misrepresentation to hold up, the aggrieved party must suffer actual damages and those damages must have occurred as a result of the party's reliance upon the misrepresented information.

For example, Joe wishes to purchase Sam's bookstore with the intention of continuing to run it as a bookstore. Prior to finalizing the sale, Sam provides false financial statements to Joe showing that the store turns a good profit each month. Joe, relying on the statements Sam provided, purchases the bookstore for a huge amount of money. After Joe takes over, he finds that book sales are dismal and the income is not sufficient to cover even the electric bill.

Joe suffered a loss resulting from his reliance on Sam's misrepresentation. His chances of prevailing in a legal action against Sam are pretty good. If, however, Joe purchased the bookstore with the intention of immediately tearing down the existing building down and putting in a gas station, Sam's misrepresentation may be deemed to be immaterial and therefore not a cause for recovery.

If you have suffered a loss due to a fraudulent business deal or you dispute facts provided as a part of transaction to which you are a party, seek the counsel of an attorney knowledgeable about business litigation. An experienced contract lawyer can help you determine whether you have a cause of action and can help you recover losses you may have suffered.

Article provided by William B. Hanley, Attorney at Law
Visit us at http://www.hanley-law.com