How Misrepresentations Can Create Liability for Businesses

Businesses may have serious difficulty contending with a claim alleging any type of material misrepresentation. Even if a misrepresentation was unintentional, a business could face significant liability.

Accounting Errors

Managing a business’ financial information can be rather complex. Having multiple people responsible for accounting information may add extra protection, but it could also lead to more discrepancies. Misstating a financial position or revenues may land a business in trouble with a partnering business or its shareholders.

Project Status Misinformation

A misrepresentation about the development of a new project could be highly problematic. A lender or investor could have relied on the misrepresentation when choosing to give a business funds. If a project is farther behind than a business indicated, a third party’s return on an investment could be substantially delayed.

Order Fulfillment Capacity Issues

A business-to-business enterprise has to be very conscientious about the volume of work that it takes on. If it accepts work from a client that it does not have the capacity to complete, that other business could suffer major damages.

Ultimately, businesses need to be wary about how misrepresentations create liability exposure. In addition to implementing a high degree of care in how they conduct their operations, they need to safeguard themselves against liability for misrepresentations.

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