Innocent misrepresentation

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  Innocent misrepresentation is a misrepresentation made by someone who had reasonable grounds for believing that his false statement was true. Or isthe belief on reasonable grounds up till the time of the contract that the facts represented are true,  as per section.2(1)of the law of contract Act, cap 345, [R.E 2002]
There are five basic elements that must be satisfied to prove innocent misrepresentation;-
a)Someone must makes a false representation 
b)The misrepresentation is material to the transaction
c)The other party must substantially rely on the misrepresentation, 
             d)The lie must also proximately cause the other party to suffer damage
e)The loss of the one party must benefit the other.
Remedy: The misled party may rescind but has no entitlement to damages. However, the court may declare the contract subsistingand award damages in lieu of rescission. By contrast, the victim of a breach of warranty in contract may claim damages for loss, but may not repudiate.
Fraudulent misrepresentationis any type of lie or false statement that is used to trick a person into an agreement. The misrepresentation can occur through many ways, including written words, spoken words, gestures or body motions (such as a nod), or through silence or inaction.Fraudulent misrepresentation is frequently raised in connection with contract law. Whenever parties enter into a legal agreement or contract with one another, all parties must agree to the contract terms. However, if there is any instance of fraudulent misrepresentation, it can affect the contract in many ways, such as making it invalid.
An example of this is where one party purposefully makes a statement that is false to the other party, for the purpose of getting them to sign a contract. For instance, if an auto dealers lies about the accident history of a used vehicle, and you sign a contract because you thought the car was never in an accident (but it was), then it might be considered fraudulent misrepresentation. 
It’s important to keep in mind that almost every legal issue, including issues with fraudulent misrepresentation, depends on the facts and circumstances surrounding the case. 
Fraudulent misrepresentation is also defined in the third party test in Donohue v Donohue, where the defendant Donohue was categorically declared completely fraudulent as he:
(i) knows the statement to be false, or
(ii) does not believe in the statement,or
(iii) is reckless as to its truth.
The elements of fraudulent misrepresentation includes;-
1.                  A representation was in fact made;
2.                  That particular representation was false;
3.                  The defendant had knowledge that the representation was false; 
4.                  The statement was made with the intention that the other party rely on it and enter into a contract or agreement; 
5.                  The plaintiff did in fact rely on the misrepresentation and would not have otherwise entered into the contract or agreement without it; and
6.                  The plaintiff suffered measurable harm as a result of the fraudulent information or statement. 
Remedy: The misled party may rescind and claim damages for all directly consequential losses. Doyle v Olby 1969. Entitlement to damages, or rescission of the contract.
The differences between fraudulent and innocent misrepresentation
Contestability Period, when an application is approved and the policy is issued, the policyholder is then subject to a contestability period, typically lasting two years. During the contestability period, the insurance company is allowed to deny a claim if there was a misrepresentation regarding any of the information provided on the application for insurance. This is the case even if the misrepresentation was due to an oversight or error. After two years have elapsed from the issuance of the policy, the misrepresentation must be fraudulent. This means that the erroneous information was provided either deliberately or recklessly. At this point, the burden of proof is on the insurance company to provide evidence of fraud.
Denial of Benefits, Whether the misrepresentation in question is innocent or fraudulent, it can result not only in a denial of benefits, but also render a contract void.Every day, countless disability, critical illness and life insurance claims are denied and policies terminated on the basis of misrepresentation. Not all of these denials are legitimate, as often, the questions on insurance applications can be deliberately confusing and ambiguous. Or information in the policyholder’s medical records are incorrectly interpreted by the insurance company.
It is critical to consult with an experienced insurance lawyer before accepting the insurance company’s denial of benefits.


REFERENCE
THE LAW OF CONTRACT ACT ,CHAPTER 345 , R.E 2002
ONLINE MATERIALS.

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