When a business makes fraudulent statements, parties who relied on those statements to make financial or business decisions may be able to file a fraudulent misrepresentation claim. These claims can result in sizable fines and damage the fraudulent business’s reputation.
As a business owner in New York, here are five proactive things you can do to prevent fraudulent misrepresentation claims.
Prioritize Accurate and Transparent Communication
Make sure that all marketing materials, advertisements, and other communications about your business are accurate. This includes not exaggerating the capabilities or benefits of your products or services.
For example, if you overstate the effectiveness of your product and someone invests in your business because of it, they could bring a claim against your company for fraudulent misrepresentation.
Get Professional Input When Drafting or Reviewing Contracts
Any time your business enters into a contract with another party, you should have an attorney review it. This can not only protect your business from potentially unfavorable terms and assumed risks but also protect it against claims of fraudulent misrepresentation.
If the contract’s wording is ambiguous, its meaning could be up for debate. If you believe the contract says one thing and the other business believes it says another, this is a recipe for misrepresentation claims. Having a legal professional draft and review all of your contracts is the best way to guard against this risk.
Conduct Due Diligence When Forming Partnerships
You should also conduct your due diligence when entering into partnerships with other businesses, such as suppliers. If you don’t fully understand their business, you may make inaccurate statements and expose your business to legal claims.
For example, you may advertise your product as being 100 percent made in the U.S. However, one of your main suppliers may actually source components from another country, like China. You could be sued for misrepresentation if you failed to verify where these components came from before advertising your product as being 100 percent U.S.-made.
Train Employees on Best Practices
Even if your marketing materials and contracts are perfect and you conduct your due diligence when forming business partnerships, your employees could leave you open to a lawsuit. Training your employees on your products and services is essential so they know what they can and can’t say about them.
Employees should understand their responsibility to provide accurate information to customers, clients, and others making financial decisions based on your business. Properly training employees reduces their chances of misinforming someone about your company and increases their capabilities when it comes to correcting misinformation.
Develop a Robust Compliance Program
Creating a robust compliance program is an excellent way to ensure your business follows best practices for avoiding fraudulent misrepresentation claims. Your program should include policies and procedures that adhere to industry compliance standards and encourage employee participation.
For example, employees should be able to file internal reports when they notice something that could put the business at risk of a fraudulent misrepresentation claim. These reports can help you identify and correct shortcomings in your operations before they become legal issues.
However, your program should also include regular internal audits so that you don’t solely rely on employee reports. The best way to protect your business is to be proactive.
Need More Info? Contact a Manhattan Business Attorney
Is your business facing a fraudulent misrepresentation claim in New York? Contact the law office of Levy Goldenberg LLP for an initial consultation about your case. One of our experienced business law attorneys will evaluate your case and work with you to develop a robust legal strategy.