Running a successful business is about more than just know-how and the right product or services. Customers demand solid ethics and personal integrity to keep them coming back. However, sometimes misrepresentation in business happens either willfully or unintentionally which is why insurance companies offer coverage for the consequences of these instances. There are three requirements for legal action against misrepresentation.
Representation Was False
The law requires that some representation made to a client was indeed false. This is especially significant if the client signed a contract based on that false statement.
Representation Was Knowingly or Recklessly Made
Employees will sometimes knowingly lie to a customer to close a deal. Other times, it’s through recklessness with the truth when the employee disregards reasonable care and misleads a client through carelessness rather than willfulness. There are also times when employees will earnestly believe they’re making true statements that turn out not to be so, and companies will still be liable for those as well.
Party Suffered Damages
The other criteria only matter if the person relying on the representations suffers some sort of harm from them. Usually, it is monetary loss through a contract made based on misrepresentations. The aggrieved party can seek restitution in court, but those legal fees may be covered with the proper commercial liability insurance.
Professionals should always operate with the utmost care when making claims to a customer. Since that isn’t always the case, it’s important to know how the law treats such scenarios.