How does the law differentiate between fraudulent and negligent misrepresentation?

The law clearly distinguishes between fraudulent and negligent misrepresentation based on the intent behind the statements made. Fraudulent misrepresentation occurs when one party knowingly makes a false statement with the intention to deceive another party, thereby inducing them to enter into a contract or agreement based on that misinformation. This intent to deceive is a key element that differentiates it from other forms of misrepresentation.

On the other hand, negligent misrepresentation arises when a party makes a false statement without exercising reasonable care or competence in ascertaining the truth of the information provided. Here, there is no intent to deceive; rather, the party is failing to meet a standard of care that could have prevented the misinformation.

This distinction is crucial within New Zealand consumer law, as fraudulent misrepresentation may lead to more severe legal consequences, including potential damages for deceit, whereas the consequences for negligent misrepresentation might involve a different standard of accountability related to carelessness rather than intent. Understanding this difference is essential for correctly assessing legal outcomes in cases of misrepresentation.