Misrepresentation

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Misrepresentation

Conditions of liability- it will be treated as true if it is substantially correct and the difference between what is actually represented and what is actually correct would not have been likely to induce a reasonable person in the position of the claimant to enter into a contract.

Ambiguous representation- the representor makes a statement to bear a meaning, which is true, but it is so obscure that the representee understands it in a different sense. If it is ambigous there a few possible scenarios- 1) representor is not liable if his interpretation is the correct one 2)neither the representor is liable for fraud, even if the courts hold that the representees interpretation is the correct one. This is the case as long as the representor honestly believed in the truth of the statement. 3) a representor is guilty of fraud if he makes an ambiguous statement intending it to bear a meaning which is to his knowledge untrue, and if the statement is reasonably understood in that sense by the representee.

Mere puffs- They are so vague they dont have legal effect. However there might be liability is the claim is precise- Carlill v Carbolic Smoke Ball Co. The crucial test is whether it is a verifiable fact. 

Statements of belief or opinion- If it is a mere statement or opinion it does not have legal effect. It must be a positive assertion that the fact stated is true. If the statement maker has no knowledge of the facts it will be inferred that it is merely an opinion. 

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conditions of liability

However if the facts on which the opinion is based are within the knowledge of the person stating the opinion, it may be taken as a statement of fact. The sample applies when a person honestly makes a statement of belief and is in a position to check the facts that ground the belief, but fails to do so. He impliedly represents that he had reasonable ground for his opinion. Bisset v Wilkinson 1927, Esso Petroleum Co v Mardon 1976 and Smith v Land and House Property 1884. 'It is well established that a statement that a vendor is not aware of a defect in title carries with it an implied representation that he has taken reasonable steps to ascertain whether any exists... if there is anything to put him on inquiry as to the existence of a defect, he may have to persue the matter further by questioning others or examining their documents'-William Sindall v Cambridgeshire CC 1994.

Statement of present intention as statement of fact- a person may make a statement of his present intention and he does misrepresent a fact if, when he made the statement, he does not actually have this intention. Edginton v Fitzmaurice 1885, Kleinwort Benson v Malaysian Mining Corp and East Maurer 1991.

Representation made by another- the representation must have been made by the party against whom relief is sought or his agent.

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Conditions of liability

Non disclosure amounting to misrepresentation- There is no duty to disclose material facts known to the person, but unknown to the other party. However there are some exceptions- 1) duty to correct a representation later made false- With v O'Flanagan 1939  2) statements that are literally true but misleading - Notts Patent Brick and Title Co v Butler 1886. 3) disclosure is required by custom- Jones v Bowden 1813. 

A misrepresentation of law can become a statement of fact- Pankhania v Hackney LBC 2002.

When a misrepresentation becomes a term of the contract- the injured party will have two claims 1) breach of contract 2) misrepresentation

A misrepresentation has no legal effect unless it is material- the misrepresentation must affect the judgement of a reasonable person entering into the contract or must be one that would induce him to enter into the contract without further investigation as he would have otherwise made. 

Known to the misrepresentee- Horsfall v Thomas 1862, and Clef Aquitaine SARL v Laporte Materials 2000. 

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Material

Reliance- the representee must have relied on the statement to the extent that the representation induced him to enter into the contract. The crucial test is the but for test, had the misrepresentation not been made to him, the representee would not have contracted or would not have done so on the established terms- Raiffeissen Zentral Bank v Royal Bank of Scotland 2010. However in the case of fraudulent misrepresentation the but for test does not apply. It is sufficient to show that the misrepresentation was a reason to enter into the contract - Barton v Armstrong 1976. 

Plurality of inducements- Edgington v Fitzmaurice 1885. 

When the representee decides to test the accuracy of the representation- in these circumstances the representee is relying on his or her own judgement rather than the representation- Attwood v Small 1838. The rule does not apply in the case of fraudulent misrepresentation- S Pearson and Son v Dublin Corp 1907,

Opportunity to find out truth- Redgrave v Hurd 1881.

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Damages

Fraud- a person who suffers loss as a result of entering into a contract on the basis of fraudulent misrepresentation can claim damages in an action of deceit in common law. He can both rescind (no contract retrospectively or in the future) and claim damages. If fraud ifs proof then a greater measure of recovery can be possible and takes away the possibility of award of damages instead of rescission under ss2 (2) of the Misrepresentation Act 1967. Fraud should be clearly proved. 

What is the state of mind of the representor who makes a fraudulent false statement- Derry v Peek 1889.  A statement is fraudulent only if made i) with knowledge of falsity or ii) without belief in its truth or iii) recklessly not caring whether it is true or false- Kriti Palm 2006.

Intention to decieve suffices- it is not necessary there is intention to defraud, intention to decieve suffices. Pollhill v Water 1832 and Angus v Clifford 1891.

Negligence at common law- a misrepresentation is negligent is the false statement is made carelessly and in breach of a duty of care owed by the representor to the representee.- Hedley Byrne v Heller 1964.

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Common law negligence

Special relationship between the parties- Duty of care test Caparo v Dickman 1990.

Representation made for a particular purpose- Smith v Eric Bush 1990, Caparo v Dickman 1990, James McNaughton Paper Group v Hicks Anderson 1991. 

Assumption of responsibility- Hedley Byrne v Heller 1964 and Henderson v Merret Syndicates 1995.The test is objective, what would resasonably be inferred from the representors conduct against the background of the circumstances. 

Professional skill- Mutual Life v Evatt 1971. 

Misrepresentation Act 1967 S2(1)- Statutory liability for misrepresentation- 'where a person has entered into a contract after a misrepresentation has been made to him by another party thereto and as a result thereof he has suffered a loss, then, if the person making the misrepresentation would be liable to the damages in respect thereof had the misrepresentation been made fraudulently, that person shall be so liable, notwithstanding that the misrepresentation was not made fraudulently, unless he proves that he had reasonable gound to believe and did believe up to the time that the contract was made that the facts represented were true.'

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Common law negligence

No special relationship- the duty arises from the contract. It does not apply if a) the representation was made by someone who is not party to the contract and b)when a concluded contract has not been reached. 

Burden of proof- Howard Marine v A Odgen and Sons 1978 and Oscar Chess v Williams 1957.

The fiction of fraud- the danger is that rules that were made for the context of fraudulent misrepresentation might apply to negligent misrepresentation. The rules that apply to fraudulent misrepresentation are 1) it is sufficient that the fraudulent statement is 'a reason to enter into the cotract', the but for test does not apply. 2) the fraudulent representor cannot exclude liability for his fraud. The 'reasonableness test' does not apply. It is doubtful that this is the effect of the 'fiction of fraud' formulation.

Affirmation- affirmation does not deprive the representee of right to damages under S2(1) of the Misrepresentation Act 1967. Duty to mitigate the loss. 

Innocent Misrepresentation- a statement which was neither fraud nor neglient. The representor must believe the statement to be true and prove they have reasonable grounds to believe it.

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innocent misrepresentation

The representee is entitled to rescission and indemnity. There is no right to damages. However the judge can award damages in lieu of recission under S2(2) of the Misrepresentation Act 1967. 'Where a person has entered into a contract after a misrepresentation has been made to him otherwise than fraudulently, and he would be entitled, by reason of the misrepresentation, to rescind the contract, then, if it is claimed, in any proceedings arising out of the contract, that the contract ought to be or has been rescinded, the court or arbitrator may declare the contract subsisting and award damages in lieu of rescission, if of opinion that it would be equitable to do so, having regard to the nature of the misrepresentation and the loss that would be caused by it if the contract were upheld, as well as to the loss that rescission would cause the other party.' 

Discretionary award- neither party has the right to require its exercise. The court can balance the interest of the parties. William Sindall v Cambridgeshire CC. 

Rescission- damages under this head can only be awarded in lieu of rescission. The representee cannot rescind and also claim damages. Government of Zanzibar v British Aerospace 2000. 

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Assessment

Tort and Contract- in tort law the claimant should be put in the same position as if the misrepresentation would not have been made. By contrast in contract the claimant is entitled to be put in the same position as if the representation had been true. The damages in tort are prima facie the amount by which the actual value of thing bought is less than the price paid for it. Damages in contract are prima facie the amount by which the actual value of the thing bought is less than the value which it would have been if the representation was true. 

Misrepresentation Act 196 S2(1)- assessed on a tortious basis. 

Loss of opportunity- Clef Aquitaine v Laporte Materials 2001 and East v Maurer 1991.

Remoteness- fraud- the representee might suffer consequential loss as a result of the misrepresentation and they can recover as long as they are not too remote. Dolby v Olby 1969, Smith New Court Securities v Scrimgeour Vickers 1997.

The rules of remoteness are more favourable for actions of deciet than they are for breach of contract: 'in contract the damages are limited to what may reasonably be supposed to have been in the contemplation of the parties. The defendant is bound to make reparation for all the the actual damage directly flowing from fraudulent inducement... it does not lie in the mouth of the fraudulent person to say they could not reasonably have been forseen'- Denning 1969.

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negligence and MA 1967

In actions of negligence in common law, the loss must be reasonably foreseeable. Where the action is brought under the Misrepresentation Act 1967 s2(1) one possible interpretation is taht the principles of fraud apply due to the fiction of fraud. Royscott Trust v Rogerson 1991, Smith v New Court Securities v Scrimgeour Vickers 1997.

Fluctuations in value- Date of transaction rule- Smith v New Court Securities v Scrimgeour Vickers 1997, Downs v Chappell 1997, Pankhania v Hackney LBC 2002

Misrepresentation Act 1967 S2(2)- under this head, damages may be awarded in lieu of rescission even though the misrepresentation is innocent and even in circumstances were there is no contractual force. They are sui generis. The statute does not give any indication of how to assess the damages. The person should be liable for the amount by which the actual value of what he has transferred is less than the price recieved by him or her. It is doubtful that the representor will be liable for consequential loss. William Sindall v Cambridge CC 1994.

Indemnity- Whittington v Seale Hayne 1900. No indemnity is right to rescind is barred.

Contributory negligence- Standard Chartered Bank v Pakistan Shipping No2 2002, Redgrave v Hurd 1881 and Gran Gelato v Richcliff 1992. 

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Rescission

Common Law-

Rescission for misrepresentation- Contract voidable- Redgrave v Hurd 1881 and Car and Universal Finance v Caldwell 1961.

Effect on property rights- Affirmation- Long v Lloyd 1958

Lapse of time- Leaf v International Galleries 1950

Restitutio in integrum- Clarke v Dickson 1858

All or nothing process- TS Bank v Camfield 1995 and De Molestia v Ponton 2002. 

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