Supreme Court decision on misrepresentation during pre-contract negotiations

In a significant decision by the Supreme Court, a representor has been held liable for its negligent misrepresentation to another party other than the party that was later induced to conclude the contract.

A negligent misrepresentation is an untrue statement of fact or law made by Party A that induces Party B to enter into a contract that causes him loss. The negligent misrepresentation can be express or implied and must have continuing effect until the time the contract is concluded. This means that there is a continuing duty on the representor if he realises the inaccuracy of his innocent misrepresentation to disclose it or be liable for damages.

A principal can be liable for the fraudulent misrepresentation of his agent should the agent induce the representee into concluding a contract with the agent on behalf of the principal, even if the agency commenced after the misrepresentation was made (as long as the misrepresentation is continuing after the agent’s appointment and until conclusion of the contract)…

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