The misrepresentation must have been made by the other contracting party or by their agent acting within the scope of their authority, or the other contracting party must have known of the misrepresentation. The misrepresentation will only be actionable under contract law if it is at least one of the reasons for which the claimant entered into the contract.
So if the claimant was not aware that the statement had been made, or knew it was untrue, or it did not affect the decision to enter into the contract, the misrepresentation will not be actionable.
Knowledge that another party’s statement was untrue will only prevent that statement from being an actionable misrepresentation if it is genuine knowledge: mere suspicion, or possession of information which could reveal the lie if checked, are not enough. This is the position held in the case of Redgrave v Hurd (1881).
Where the innocent party does not rely on the other’s statement, and instead conducts their own investigations, or simply relies on their own judgment, the party making the misrepresentation will not be liable as was illustrated in the case of Attwood v Small (1838).
Although a misrepresentation must be relied upon by the innocent party in order to be actionable, it does not need to be the only reason why the innocent party entered the contract.
Constructive knowledge
In some situations a party to a contract may not have actual knowledge of a misrepresentation but for public policy reasons they will be treated as if they did have that knowledge, known as constructive knowledge.