Explanations

A “gross misrepresentation” by an agent encompasses several key elements that collectively constitute fraud or actionable misrepresentation:

• A. The representation is an obvious falsehood: While a statement might be an obvious falsehood, if it is presented as a fact with the intent to deceive and subsequently relied upon, it contributes to misrepresentation. The sources define misrepresentation as an untrue or misleading statement.
• B. The representation is made with the knowledge of it being a falsehood: This is a defining characteristic of “actual fraud”. Actual fraud occurs when a person knowingly and willingly makes a false statement of material fact with the intent to deceive another party. This includes situations where a party tells an absolute lie that they know to be 100% false.
• C. The representation caused the aggrieved party to enter into the contract: For misrepresentation or fraud to be legally actionable, the aggrieved party must have relied on the false statement, and that reliance must have caused them to suffer loss or harm, such as by entering into a contract. Mutual agreement in a contract cannot exist if one or more parties entered into it due to deliberate deception or misrepresentation.

Therefore, when an agent makes a statement that is an obvious falsehood (A), with the knowledge that it is false (B), and this deception causes an aggrieved party to enter into a contract (C), it represents a gross misrepresentation.

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