Misrepresentation in contract law is what is known as a ‘vitiating factor’ that may render a contract invalid. It will occur when one party induces another to contract on the basis of a false statement. This formulation of misrepresentation requires a positive act (i.e. an actual statement by another) rather than an omission.
However, there is an exception to this rule, and in certain circumstances, “silence” will amount to a misrepresentation and create grounds for seeking a remedy. One of these circumstances is where a party fails to disclose material facts regarding a contract, with the result being a false impression gained by the other contracting party. This is known as concealment, and can either be fraudulent (i.e. deliberate) or inadvertent. A fraudulent concealment under the common law provides grounds for the innocent party to rescind the contract. Rescission is the most common type of remedy for fraudulent misrepresentation, however, a party may elect to keep the contract on foot and sue for damages.