Definition: a misrepresentation is an untrue statement of fact made by one party to the other which unduces them to enter into the contract
Fact not Opinion
- if the statement is a statement of opinion and not of fact that is not a misrepresentation. Bisset V Wilkinson: bisset was selling a holding in New Zealand to Wilkinson. The holding had not previously been used as a sheep farm, and Wilkinson knew this. Bisset said that the land would support 2,000 sheep. This was held to be a statement of opinion and not of fact.
- but a statement of opinion may involve a statement of fact by implication. Smith V Land House Property: the vendor of a hotel described it as "let to Mr Frederick Fleck (a most desirable tenant). The tenant was infact in arrears with his rent. it washeld that the statement was not a mere expression of opinion because the vendor was impliedly stating that he knows facts which justify his opinion.
Fact not intention
- a statement of intention may sometimes involve a statement of fact. Edgington V Fitzmaurice: the directors of a company invited a loan from the public and stated that the money would be used to improve the companys buildings and to extend the business. the real intention of the directors was the use the money to pay off the compants exiosting debts. their statement of intention was held to be also a statement of fact.
Silence as Misrepresentation
- the general rule is that mere silence is not misrep. however, in the following circumstances a failure to speak does amount to misrep.
- change of circumstances - With V O'flanagan: the defendant wanted to sell his medical practice. negotiations for the sale to the plaintiff began in january. the defendant said that the practice was worth £2,000 per year, which at the time it was. the defendant then fell ill, and by may when the contract was signed, the practice had become virtually worthless. it was held that the defendants silence as the the change in circumstances had led to misrep.
- truth but not the whole truth - Patent Brick & Tile V Butler: the purchaser of some land asked the vendors solicitor whether the land was subject to restrictive covenants. the solicitor replied that he was not aware of any. he did not go on to explain why he wasn't aware of any; namely, that he had not bothered to read the deeds. it was held that the solicitor's statement, though literally true, amounted to a misrep.
- contracts of utmost good faith - there are some contracts known as 'uberrimae fidei'. contracts in which there is a duty to disclose material facts. the reason for this rule is that they are contracts in which one party is in a particularly strong position, compared with the other party, to know the facts
- some fiduciary relationships - a duty of disclosure may arise from the relationship of the parties, eg. principal and agent, promotors of a company and the company itself and the duty of disclosure between partners,
The Nature of the Inducement
A Misstatement is a misrepresentation only if it induces the person to whome it is made to enter into the contract. It cannot be said to do so if he/she does not rely on the misstatement. it is for the defendant to show that the plaintiff did not rely on the statement. Thus, if a misstatement is made to a person and that person makes his/her own investigations to test the truth of the statement, then he/she cannot claim releif on the ground of misrep.
- Attwood V Small: a vendor offered to sell a mine and made and exxagerated statement as to its capacity. the buyers appointed expert agents to investigate the mine. the agents reported that the exxagerate claims were correct. the contract of sale was then completed. it was held that the buyers subsequent action must fail because they had not relied on the sellers statements, but on their own independent investigations.
- But if a person, though he is given an opportunity to test the accuracy of statement, doesn't take the opportunity, he is not shut out from relief. Redgrave V Hurd: a man was induced to buy a solicitors practice by a misstatement of its value. he was given an opportunity to examine the accounts but declined. if he had examined the accounts he would have discovered the truth. the misstatement was held to be an operative misrep.
Types of Misrepresentation
- most difficult to prove. definition in Derry V Peek; will be fraudulent misrep is statement is made knowingly, without belief in its truth, recklessly, careless whether it be true or not.
- damages in tort of deceit, Doyle V Olby highlights that damages based on tort principles, not contract principles.
- rescission: each party handing back what he got under the contract known as restitution.
- bars to rescission:
- restitution impossible: Urgers V Pike, restitution of mine impossible because it had been evacuated.
- 3rd party rights aquired: White V Gordan, iron sold to innocent 3rd party so claims good title - can't rescind contract.
- affirmation: Long V Lloyd, defects on lorry were accepted as not rejected as soon as aware of them
- lapse of time: Leaf V Galleries, five years to return painting too long
- statutory bar: misrep act, court can award damages instead of rescission
Types of Misrepresentation
- leading case is Hedley V Heller: heller provided negligent advice when stating the creditworthiness of a company called easipower. hedley byrne invested in easipower and lost money. they sued heller for negligent misrep. lost because heller had said all correspondence was 'without responsibility'. but obiter, court said this would have amounted to negligent misrep.
- Esso V Mardon: