Misrepresentation

MISREPRESENTATIONS

DEFINITION:

Representations are made during pre-contractual negotiations- if they're unture they're called misrepresentations (misreps). A misrep is an untrue statement of fact which isnt a term but has an inducing effect.

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MISREPRESENTATION- DEFINITION:

Representations are made during pre-contractual negotiations- if they're untrue they're called misrepresentations. They're untrue statements of fact which isnt a term but have an inducing effect. These are NOT misreps:

1) Mere Commendations -Tend to be of the advertising kind. DIMMOCK V HALLET = An estate agent describing land as 'fertile and improvable' was a mere commendation and not a misrep. 

2) Statements Of Opinion -Tend to lack significance. BISSET V WILKINSON = When sellers estimate of how many sheep the land could hold was signif below the actual amount, the buyer sued for misrep. The seller was simply stating an honest opinion & had no experience in this area. Claim of Misrep failed. 

3) If one party is an expert in a certain area & gives a false opinion then the other party can claim misrep. ESSO V MARDEN -M was buying land to open petrol station under Esso who provided an estimate of how much petrol would be sold each year. When this was signif below their estimation, M sued. He succeeded because: a) Esso were experts in this area and had more facts. b) Esso owed a greater duty of care over the statements than the average person. c) When the circumstances changed, Esso were under a duty to revise their figures. INNTREPENEUR V HOLLARD -When the wrong takings of a pub were stated, this was a misrep as this person should have known the true amount. The courts aren't looking at actual evidence here, instead they considered what he SHOULD HAVE KNOWN.  AO2 - Protects weaker party when an expert gives wrong advice. 

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MISREPRESENTATION- DEFINITION CONTINUED:

Statements of Future Intentions are statements one party makes about what he intends to do and generally are not misreps. Other party are able to take action if it can be proved that there was never any intention of carrying out the act. EDGINGTON V FITZMAURICE- Shares in a business were sold with the statement that the aim was to improve and expand the business. When it was found that the aim was to actually pay off debts, The other party claimed misrep. Since it could be clearly proven that the true intention of the party was not what he stated, there was a misrep.

Statements of the Law are not held to be fact as no one is expected to be any more knowledgable about the law than the next person. There are exceptions to this whereby the following will be liable for misrep of the law: a) A lawyer (expert). b) A mirep of the law where there's no belief in the statement. 

However, more recently theres been a move away from the traditional position regarding wrong statements of the law. PANKHANIA V HACKNEY LONDON BOROUGH COUNCIL- This concerned a £4million purchase of commercial property and the wrong statement concerned whether the property was legally subject to a license or tenancy. Therefore, there can be no liability for misrep of the law. 

AO2- Law in this area is becoming mre flexible. This was a fair decision as it made a signif difference to value of land. 

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MISREPRESENTATION- SILENCE:

Rule: Silence doesn't amount to misrep. The principle of Caveat Emptor applies. FLETCHER V KRELL- A claim of misrep was made against a governess for not disclosing she'd been married. Simply keeping quiet about a matter where no questions were asked didn't amount to misrep. 

EXCEPTIONS:

1) CONDUCT``: A nod, wink etc would be conduct amounting to misrep. ST MARYLEBONE PROPERTY V PAYNE- A misleading photo of a property was misrep. SPICE GIRLS V APRILLIA- Group took part in filmin an ad for scooters. Held to be misrep as they knew they werent staying together, but nothing was said. 

2) CONCEALING DEFECTS: If a positive act is done to conceal a defect the misrep may arise. SCHNEIDER V HEATH- Boat deliberately submerged to conceal defect was held to be misrep.

3) HALF TRUE STATEMENTS: Statements which are true but are misleading by being incomplete may be misrep. DIMMOCK V HALLETT- Although it was true that the farms were let to tenants, the ommission that they'd all given notice to leave was misleading and so it was misrep.

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MISREPRESENTATION- SILENCE CONTINUED

4) CHANGE IN CIRCUMSTANCES: If the statement originally made is no longer true because of a change in circumstances then failure to disclose this is misrep. WITH V O' FLANAGAN- a Dr. selling his practice stated his current income. When he became ill, this fell dramatically. As he failed to change his original statement it was misrep. ESSO V MARDEN- Failure to amend the estimate when road layout changed was misrep. 

5) FIDUCIARY RELATIONSHIP: Where one party is in a position of responsibility over the other theres a greater duty to disclose facts. HEDLEY BYRNE V HELLER- H, the bankers, gave assurance over the creditworthiness of a third party to HB. As the bank were the only ones aware of this fact they were in a position of trust so the third party couldn't repay their loan, HB were, obiter, able to claim  misrep. However an exclusion clause in the contract prevented misrep here.

6) CONTRACTS UBERRIMAE FIDEI: An absolute duty is imposed on the party to disclose all relevent facts, even where no questions are asked. The party must show uberrimae fedei eg. contracts for insurance. SEAMAN V FONEREAU- the insurance co. placed the owner of the ship under a duty to report all material facts. Failure to report that the ship had previously been in diffuculty at sea made the contract void. BUFE V TURNER- Failure to report a fire in an adjoining property made the contract void. 

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MISREPRESENTATION VIA 3RD PARTY + INDUCEMENT

Misreps made by one party to another are said to be 'spent'. Therefore, if the 2nd party passes it on to a 3rd party, its no longer a misrep. However, the exception to this is where the first party knows the misrep will be passed on. PILMORE V HOOD- Seller of a pub wrongly stated takings, knowing this would be passed on to the party wanting to buy the pub. This was misrep, even though it wasn't directly made to the buyer. The fact was made, knowing it would be passed on by another party made it actionable. 

AO2- Fair and protects weaker party from the first parties dishonesty.

Inducement is where the untrue statement induces the other party into entering the contact. This must be satisfied. Therefore, if the statements have no effect on the other party, or they weren't aware of them, then misrep can't be claimed. ATTWOOD V SMALL- Buyers of a mine couldn't claim misrep when the amount of minerals was less than that stated by the seller as they'd relied on the results of their own survey and not their sellers statements. BARTON V COUNTY NAT WEST- held there's a rebuttable presumption that the claimant relied on an inducing statement, if a reasonable person would have done so. 

AO2- A V S: Fair decision because buyer placed no reliance on the untrue statment. B V CNW: "Reasonable" is vague and open to interpretation. 

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THE CLASSES OF MISREPRESENTATION

FRAUDULENT MISREP: DERRY V PEEK- Fraudulent misrep is a false statement 'knowing without belief in its truth, or recklessly as to whether it be true or false'. A statement made by a person who doesnt believe it to be true. Courts must consider the state of D's mind- according to AHMED V ADDY, the standard of proof must be 'beyond reasonable doubt'. There are 2 Remedies for this Misrep: 1) Damages- Based on tort of deceit whereby P is restored to the position he would have been in if it hadn't happened. 2) Rescission- Handing back anything passed over during the contract. However this is an equitable remedy- so its not always granted.  AO2- Choice of remedies is good because the victim can choose the most suitable. It's fair but there are always bars to rescission so its not always available. 

NEGLIGENT MISREP: Person making statement honestly believes it to be true, but without taking reasonable care to ensure that it is. Its negligence, not dishonety. Before 1964, only rescission was a remedy for this. This was changed by the HOL in HEDLEY BYRNE V HELLER. The judges stated obiter dicta that damages could be awarded for negligent misrep. To succeed, a duty of care and a special relationship had to be present. HEDLEY BYRNE V HELLER- Company asked to do advert work for Easipower & provide credit to the value of £100,00. They contacted Easipowers bank to check their creditworthiness, & the bank replied that their creditworthiness was satisfactory although they stated that they took no responsibility for this statement. Easipower went into liquidation and tha claimants brought an action of negligence against the banker, but this failed as liability had successfully been disclaimed. 

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MISREPRESENTATION UNDER STATUTE

THE MISREPRESENTATION ACT: Provides a remedy for non fraudulent misrep where the person would have had a remedy had it been fraudulent. A burden is placed on the defendant to prove that it was reasonable to believe, and that he himself believed, in the truth of his statements. Essentielly, the person making the statements must prove he wasn't negligent in what he said, rather than the other party proving liability. The burden of proof is switched over to the defendant. The burden is heavy. 

HOWARD MARINE V OGDEN: Hirers of barges were given the wrong info by the owners as to their capacity. Owners had used Lloyds register but on this occasion it was wrong. The correct info was actually found in the owners own records but the owners had checked Lloyds, a reasonable thing to do. However, court decided that since they had the right info in their office, the statements they'd made were false. The burden was on them to show they hadn't been negligent in their statements and this was very difficult for them to do. 

ROYSCOTT V ROGERSON: Courts assess damages under the Misrep Act on a reliance basis. The aim is to put the parties back to the position at the outset. This is the same for fraud damages. 

Parties are normally taken back to the starting point but don't usually recieve damages for lost profit. However, in EAST V MAURER: it was decided that in certain circumstances damages can be rewarded to cover lost profits as well. 

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INNOCENT MISREPRESENTATION

Applies to statements made entirely without fault, to theres no dishonesty or negligence. Theres no automatic right to damages, but under S2(2) of the Misrep Act the court has discretion to award damages where it refuses to allow rescission. 

Rescission: Parties restored to their original position by handing back anything obtained. Parties are restored where they were ab initio- from the outset. Rescission is available for all types of misrep. 

Bars to rescission:

1) LAPSE OF TIME- Fraud= begins at point of discovery of the misrep (lapse of time therefore rare). Non fraud= time begins from the point of contract so times very important. LEAF V INTERNATIONAL GALLERIES.

2) AFFIRMATION- Indication theres a willingness to continue with the contract, genrerally by actions. LONG V LLOYD- buyer of a lorry phoned seller when the lorry broke down and they agreed to split costs of repair. Buyer continued using lorry and when it broke again he tried to rescind. This wasn't possible as his ageement to repair it using the lorry indicated willingness to continue. 

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INNOCENT MISREPRESENTATION CONTINUED AND INDEMNITY

3) RESTITUTION IMPOSSIBLE: Items must be handed back in their original position. VIGERS V PIKE- Restitution of a mine wasn't possible as considerable extraction had taken place. 

4) 3RD PARTY RIGHTS: Rescission cant take place where a 3rd party gains possession of the goods. WHITE V GARDEN- Iron bars had been delivered but rescission wasnt possible as they'd been sold to a third party. 

5) STATUTORY BAR: Misrep Act S.2(2): Damages can be rewarded instead of rescission. ZANZIBAR V BRITISH AREOSPACE- The court awarded damages in lieu of rescission. 

Indemnity : This is an order by the court to accompany the rescission. Money is ordered to be paid to cover financial obligations resulting from the contract. Its not the same as damages. WHITTINGTON V SEALE- HAYNE- Buyer of farm enquired about water supply, drains and sewage system. He then bought farm and put his proze poulrty on it. However, water supply and drains werent satisfactory and some of the poultry died. Court ordered rescission so the property and the cost of the farm were handed back. Court additonally ordered an indemnity to cover the costs occurred by the buyers legal fees etc. it didnt cover the cost of the poultry as he did not have to put them on the farm.  

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