Chapter 13- Misrepresentation Mindmap PDF

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Summary

.ESTABLISHING OPERATIVE MISREPRESENTATION3. Innocent Made statement: without dishonesty had reason to believe it is true 2. Negligent Made statement: without dishonesty BUT with no basis/grounds/reason to believe it is true 1. Fraudulent Made statement: knowing it is UNTRUE not believing it to be tr...

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VITIATING FACTORS Factors that render a contract ineffective/factors that affect the enforceability of a part of or the whole contract.

ECONOMIC DURESS

PRE-CONTRACTUAL STATEMENTS

2. (MERE) REPRESENTATION

MISPRESENTATION A misrepresentation is a false statement of fact (past or existing fact) made by one party to another party which induced the other party to enter into the contract.

ESTABLISHING OPERATIVE MISREPRESENTATION 1. False statement of fact - Statement of past or present fact can be false if it’s not true - Statement of intention can be false if the representor did not have the stated intention when making statement (Edington v Fitzmaurice) - Statement of opinion can be false if representor did not hold the stated opinion when making statement, hence misrepresenting the state of his mind; OR statement was made in circumstances that impliedly represent the fact that he had access to info that reasonably supports his opinion or had reasonable grounds for such. (Esso Petroleum v Mardon) -Silence can represent false statement of fact if it renders statement made earlier a half-truth & misleading; OR there is failure to correct a previous statement that has become incorrect at time of contracting - Conduct can represent false statement of fact.

2. Statement made by one contracting party to the other - As a result of “A’s” misrep, “B” enters into a contract with “A” - As a result of “A’s” misrep, “B” enters into a contract with “C”

3. Inducement To be induced, the representee must have relied upon the representation. To establish inducement, the Singapore High Court requires that: - Have to pass the Materiality (Objective) Test. Would a reasonable person in the shoes of the representee be induced by the representation to enter into the contract? If passes, then intention to induced is presumed and burden then shifts to representor to prove otherwise. - After that, have to pass the Actual Inducement (Subjective) Test. Representee has to prove that he altered his (legal) position as a result of receiving the representation. * Note: Representation does not have to be the only inducing factor. As long as the representee was materially influenced by the misrepresentation, inducement is assumed. *

TYPES OF MISREPRESENTATIONS

2. Negligent Made statement: - without dishonesty - BUT with no basis/grounds/reason to believe it is true

1. Fraudulent Made statement: - knowing it is UNTRUE - not believing it to be true -reckless, not caring if it is true or not

3. Innocent Made statement: - without dishonesty - had reason to believe it is true

Court may order damages instead of recission: s 2(2) MA s 2(2) MA: The court may declare the contract subsisting & award damages in lieu of recission, if would be equitable to do so, having regard to [1] the nature of the misrepresentation and the [2] loss (to representee) that would be caused by it if the contract were upheld, as well as to the [3] loss that recission would cause to the other party (representor).

Contract is voidable – can choose to avoid (rescind) or affirm by declaring intention or through conduct.

Damages

Damages: s 2(1) MA

Indemnity, which is part of remedy of recission

Indemnity (protection) against all obligations created by contract.

Limits to recission (when recission is no longer available) 1. When the contract has been affirmed by the representee. Affirmation may be express or implied by conduct. However, before that the representee must have knowledge not only of the untruth, but also that the law gives him the right to rescind. 2. When there has been a lapse of reasonable time without giving the notice to rescind. For innocent & negligent misrepresentation, the lapse of reasonable time may be a bar to recission even if the representee has not discovered the truth. This is not applicable to fraudulent misrepresentation. 3. When restoration to the original position is impossible. However, what is required is not precise restitution but substantial restitution; equity allows a representee to rescind if he returns the subject matter in its altered state and make an allowance for any diminution in its value or accounts for any benefit he derived from using it. 4. When 3rd party rights arose. If before a representee rescinds a contract, an innocent 3 rd party (who acts in good faith and gave consideration) has acquired an interest in the subject matter, the right to rescission is lost. 5. When the court has ordered damages instead of recission.

EXCEPTION CLAUSE: A representor may insert an EC in the contract induced by his misrepresentation to exclude liability for loss caused by his misrepresentation. Under section 3 of the Misrepresentation Act, the EC is not enforceable unless it satisfies the test of reasonableness under the UCTA. However, it must firstly satisfy the common rule laws of incorporation and construction.

1. Incorporation: Is the clause a term (part) of the contract? Main ways of incorporation: - Signature - Reasonable notice - Previous course of dealing

2. Construction: When construed, does the EC cover the breach? For ECs that seek to limit/exclude any form of liability, the contraproferentum rule applies if the language of the EC is ambiguous. Specifically for cases of negligence liability, apply the Canada Steamship Guidelines. Canada Steamship Guidelines are used to assess if the EC excludes negligence liability.

3. UCTA: Is the clause prohibited or considered unreasonable? Test of Reasonableness: s 11(1) of UCTA states that the requirement of reasonableness is that “the term shall have been a fair and reasonable one… having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made”. s 11(2), which refers to the 2nd Schedule, is to be used to help interpret and apply s 11(1)....