Fraudulent misrepresentation

Fraudulent misrepresentation (dol) is a ground for contract avoidance in both French and Swiss law, arising when one party has been induced to enter a contract by deliberate deception — false statements, concealment of material facts or misleading conduct — by the other party. In M&A, fraudulent misrepresentation may be invoked when the seller deliberately concealed material information (hidden liabilities, undisclosed disputes, falsified accounts) that would have led the buyer not to contract or to contract on different terms. Unlike contractual warranties, fraudulent misrepresentation carries unlimited damages and may lead to contract annulment, regardless of any contractual cap agreed in the SPA.

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Example: a buyer discovers post-closing that the seller deliberately concealed a CHF 1.2 million tax liability during negotiations. The buyer invokes fraudulent misrepresentation: if the claim succeeds, damages are uncapped — unlike the SPA warranty, which was contractually capped at CHF 500,000. The forensic evidence required includes proof of the seller's actual knowledge and intentional concealment.

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Hectelion's due diligences aim to surface material omissions that could constitute fraudulent misrepresentation before any acquisition commitment is made.