Fraud and misrepresentation are often treated as the same thing and the terms are used interchangeably, but there is a difference between the two concepts in the eyes of the law, with cases being dealt with according to the provisions of either. While both fraud and misrepresentation have similar effects and may only differ in intensity or magnitude, fraud is willful and attracts a more severe penalty than misrepresentation, which is less severe.
- Fraud is committed with the intention of wrongful personal gains or to cause damage to another person, while misrepresentation is mostly used in the context of contracts where a party may present facts in a way to lure another party into signing the contract.
- Fraud is a crime with strict provisions in the law, including embezzlement, identity fraud, deceit in gambling or other sports, forging figures in income statements, claiming wrong insurance claims, falsifying as a witness, inflating invoices, forging signatures, and forging currencies.
- Misrepresentation can sometimes be innocent, where the person presenting the facts may not be in the know of all the facts and thus may create misrepresentation. In contrast, fraud is committed deliberately and with the purpose of gaining at the expense of another party.