This guest blog is prepared by my colleague, Johanna Smallman. Johanna shares her insights on navigating the complexities of misrepresentation in business contracts, particularly in the context of tech solutions that fail to deliver on their promises.

With the availability of ever more exciting A.I. products and other tech solutions for businesses which promise to streamline processes and make your business grow, I am seeing a corresponding rise in businesses who have purchased products which do not meet expectations or have even caused significant loss to their business.

It is easy to be seduced by the sales pitch from charming salespeople who promise all sorts of things but what happens when the product fails to deliver on these promises?

The Misrepresentation Act 1967 provides you with remedies for misrepresentation but what is misrepresentation?  There are three kinds of misrepresentation: innocent misrepresentation, negligent misrepresentation and fraudulent misrepresentation.

To establish misrepresentation, as a basic starting point, there must have been a statement (of fact or law) made by one party which was substantially untrue, and this statement induced the other party to enter into a contract.  Of course, the test is more complex than this but if you can show these elements, you may have a claim for damages or even recission of the contract.   Recission means that the contract is treated as though it never existed, and each party is put back into that position.

Within the cases surrounding misrepresentation you will encounter the concept of “sales puff” or “puffery”.  This meant to describe elaborations or exaggerations made generally by salespeople but not meant to be taken literally or relied upon by the purchaser when entering the contract.   These are often expressed as subjective views. For example, you might see a house described as a “dream home” or a product described as “market leading” or “best in market”.   This is classic “puff” and not intended to be taken seriously.

But what if a salesperson claims that a product will improve your sales by 30% or enhance the efficiency of your processes, only for you to discover it fails to meet these assurances? Worse, what if the product hinders your business, slows it down, or makes processes more inefficient?

In these cases, you will often be exploring whether you have a case for negligent misrepresentation.  However, this is where a lot of businesses get a bit of a nasty surprise in the terms and conditions.  Most service providers, especially those providing IT products of any sort will have terms and condition which include what is called an “entire agreement” clause.

An entire agreement clause is typically worded something like this.

Each party acknowledges that in entering into the contract it does not rely on and shall have no remedies in respect of any statement, representation, assurance or warranty (whether made innocently or negligently) that is not set out in the contract.

Also be wary of a “limitation to liability” clause which either prevents recovery for misrepresentation completely (an exclusion clause) or limits liability to the contract price.  That is important as quite a lot of IT or tech services are reasonably priced but have potential to cause catastrophic losses for your business for example if data is lost or leaked. 

So what can you do? 

If you have a problem with a service you have bought for the business, the first step is to ask a solicitor for advice.  However, the first thing the solicitor will want to see is the written contract with the service provider, so hunt this down.  You can preliminarily look for clauses related to misrepresentation and limitations of liability to gain an initial understanding, but don’t lose hope if you find such clauses; there are sometimes ways to challenge them.

Here are actionable steps you can take:

First, be careful about accepting standard terms and conditions.  Nowadays, they are often provided via a link on some email or purchase order, so it is easy for busy businesses not to check them. If you do not object to them, they will become the terms for that contract.

So always read the terms and conditions supplied to you following any sales meeting or pitch and before you buy.   Challenge entire agreement clauses with the provider, if the salesperson has made promises about the effect of a particular product on your business and this has influenced your decision to buy.   You do not have to an entire agreement clause, negotiate it!  Look out for limitations to liability or even exclusions to liability.  Consider what the worst-case scenario would be for the business if the tech product goes wrong and whether in that case you would be prepared to agree to a contract which limits liability to the contract price.   You have power as a buyer, so use it to negotiate better terms for your business and minimise future problems.

Legal disclaimer

The matters contained within this article are intended to be for general information purposes only. This blog does not constitute legal advice, nor is it a complete or authoritative statement of the law in England and Wales and should not be treated as such.

Whilst every effort is made to ensure that the information is correct, no warranty, either express or implied, is given as to its’ accuracy, and no liability is accepted for any errors or omissions.

Before acting on any of the information contained herein, expert advice should always be sought.

© Johanna Smallman, May 2025