contract-law internet international business
When is misrepresentation and concealment allowed in negotiating contracts?
<p>Suppose I, or a company I own, want to purchase a domain name from an existing owner.  Am I allowed to blatantly lie about the interests I represent and why I want the domain?</p>

<p>Can I, for example, buy the domain from them (as an individual) under the pretense that I just think the name sounds cool, or because I'm raising money to found a co-op of the same name and the domain would be helpful, and then immediately shift ownership to my for-profit company (which is, say, a plumbing company)?</p>

<p>What truths must I convey during negotiations?  In what matters is misrepresentation allowed?</p>

<p>E.g., is it illegal to tell them I'm acting on behalf of a charity or other entity that actually exists but with which I am unaffiliated?</p>

<p>I am in the U.S. I'm curious about the answer to this question if the person with whom I'm negotiating is in the U.S., but also if they are not. And I'm curious if the answer is different when I'm representing a company from when I'm representing only myself.</p>

<p>The hypothetical situation would be a material misrepresentation of the facts, as well as a fraudulent misrepresentation - both are grounds for nullifying the contract. Under your hypothetical this is almost certainly material and is certainly a fraudulent misrepresentation.  </p>

<p>A fraudulent misrepresentation of the facts pertinent to a contract occurs when one party, to a bargain for exchange, misstates a fact and either knows or believes that the fact is not true, or is not sure whether or not his statement is true but claims it to be true nonetheless.</p>

<p>If a party to the contract relies on the fraudulent misrepresentation and enters into a contract based on that misrepresentation, the contract is voidable by the innocent party. </p>

<p>A material misrepresentation is a misstatement of fact that will induce a reasonable person to enter into a contract. If a misrepresentation is material to the contract, the contract will be voidable by the relying party even if the misrepresentation is <em>not</em> fraudulent.</p>

<p>So, in this scenario, the contact would be voidable because there is both a material  misrepresentation, as well as a fraudulent one. If the other party suffers a monetary loss because of the deceit, you would almost certainly be held responsible for any damages that may flow from the inducement.</p>

<h2>Deception</h2>

<p>If the transaction was connected with Australia you would be in breach of Section 52 of the Trade Practices Act which prohibits deceptive and misleading conduct in trade or commerce. Note that under this law it is the effect (it could reasonably mislead) not the intention (you intended to mislead) that matters. This is an offence against the state and would be prosecuted by the ACCC.</p>

<p>This law only applies to corporations but the various Fair Trading laws in each state and territory have similar effect and apply to natural persons.</p>

<p>I cannot speak for statutes in other countries but in most common law countries (of which the US is one) you would be committing at the least misrepresentation, probably the tort of deceit and possibly fraud (which is a crime).</p>

<p>At a minimum, any contract you formed would be open to rescission.</p>

<h2>Negotiation</h2>

<p>When you enter a negotiation to buy anything where price regulation is not an issue, the price the seller asks/will settle for is a matter for the seller. They are perfectly entitled to take into account their perception of your capacity to pay and/or desire for the product. Go the free market!</p>

<p>You are entitled to conceal these things; you are not entitled to misrepresent them. </p>

<p>As to buying for yourself or as an agent of a company, either would be permissible.</p>

<p>The main problem you face is that a specific domain name is of value only to a tiny number of potential buyers - the mere fact that you are enquiring tells the seller that, for whatever reason, you are one of those who value it.</p>
