types of misrepresentation

Types of misrepresentation

Fraudulent misrepresentation

made knowingly, without belief in its truth or recklessly as to whether it be true of false

the definition of fraudulent misrepresentation came from the case below (but that was not a misrepresentation deemed to be fraudulent)

Derry v Peek

in this case a tram company used horses to pull its trams, the directors of the company believed that under a recent Act of Parliament the Board of Trade would consent to the company using motor-driven trams, and that this consent was a formality, but did not check. The use of motor-driven trams would make the company more profitable and the directors advertised for investors of the company on this basis. The company did not obtain the consent and the companies shares dropped in value. The purchasers of the shares sued for misrepresentation but their claim failed as this was not fraudulent misrepresentation (the only type available at the time) as the directors were only careless (negligent) as to whether what they said was true

Negligent misrepresentation

made without reasonable grounds for believing it to be true

Hedley Byrne v Heller and Partners

the claimant asked the bankers for a financial reference of a company. The bankers supplied the reference which had been negligently prepared which stated the company was in a good financial position. The claimant relied on this and entered into a contract with the company – who then ran out of money whilst owing the claimant debt still. In this case a claim for negligent misrepresentation was allowed for the first time

innocent misrepresentation

honestly believing it to be true and having reasonable grounds for believing it

e.g. repeating accurate information supplied by someone else like a label on a garment saying 'fire resistant' when it is in fact not

Remedies for misrepresentation

Rescission (like repudiate if breach) – all types of misrepresentation

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