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Misrepresentation Elements for the claim for misrep:  False statement of existing facts or law  From one of the two parties to the other  Before or at the time the contract is made  Which induces the other party to enter into the contract Actionable misrep= renders contract void Structure for problem question using ILAC= • Is there an actionable misrepresentation? – Is there a false statement of fact? – Check the timing of the statement – Did the statement induce the other party to enter into the contract? • Once misrepresentation is established, identify the type of misrepresentation • Advise on available remedies IS THERE A FALSE STATEMENT OF FACTS? Needs to be facts not opinion. Bisset v Wilkinson (1927) seller said that the field can hold 2,000 sheep but it didn’t. buyer said he relied on the statement wanted money back, court ruled that it was just an honest statement of mere opinion. This would be different if the seller was an expert sheep farmer. BUT statement of opinion may imply a statement of fact. Smith v Land and House Property Corporation. Sale of a hotel, seller said the hotel is let to the most desirable tenant, but he was actually bankrupt= misrep as the seller was in position to know the truth and he was also the landlord  Esso v Mardon 1976, land had never been used as petrol station butt considerable expertise within the specialist area. Esso are experts it cannot be a mere opinion it is fact due to expertise. Facts, not intention A statement of future intention (not fact) will not be a misrepresentation But if we can tell they were telling a lie then it will give rise to misrep Edgington v Fitzmaurice (1885) made prospectus saying they are raising money for new offices in the future but turned out they are using the money to clear their debts= misrep. At the moment in their present mind they were going clear their debts. Hard to prove. compared with Inntrepreneur Pub Co v Sweeney (2002) RULE: silence does not give rise to misrep= Fletcher v Krell, Turner v Green

EXCEPTIONS TO THIS RULE  Dimmock v Hallett= the truth but not the whole truth  Contracts of the utmost good faith- situations where the relationships between the parties is such that there is an obligation on one party to make full disclosure. E.g. private health insurance= medical history will affect the contract and if the contract is made, so cannot rely on silence.  Some fiduciary relationships- one party has put trust and faith in the other, solicitor and client, agent and principle relationships= have to make full disclosure.  Change of circumstances- where we say something and make a representation and its true and then the circumstances changes and you do not correct it. If this happens there’s no excuse. Becomes a misrep, from the point you do not make the correction. With v O’Flanagan Spice girls ltd v Aprilia world service 2000 Inducement Statement must be material and actually been relied on. Materiality is about would it influence you into getting into a contract JEB Fasteners Ltd v Marks Bloom & Co 1983, the accounts were inaccurate= was a material representation, going to determine whether you want the company or not. but did not induce the buyer as the buyer was always going to buy the company. this approach was refined in County Natwest v Barton 2002, if a statement is material, the court will infer inducement= rebuttable Raiffeisen Zentralbank v The Royal Bank of Scotland (2010) – representation played a ‘real and substantial’ part in inducing the party to enter into the contract (the ‘but for’ test) • Representation must be intended to be acted upon (Peek v Gurney) • Representation must actually be acted upon (Attwood v Small) • Innocent party was not aware of the truth when they entered into the contract (Redgrave v Hurd) • Need not be the only inducement. (Edgington v Fitzmaurice) Fraudulent misrep Claimant must prove that the statement maker: • knew the statement was false; or • believed it to be false; or • didn’t care whether or not it was true (recklessness)

Negligent misrep: Hedley Byrne v Heller (1964) *Claimant must establish negligence on the facts * Note the effect of the disclaimer in this case * Need to establish a special relationship that was sufficiently proximate that gave rise to negligence. Caparo Industries Plc v Dickman and others (1990) – sufficient degree of proximity between the parties Section 2(1) Misrepresentation Act 1967 * Favours the representee *No need to establish a special relationship/duty of care *The burden of proof is reversed *No need to establish negligence (no breach of duty) * Awarded damages as if the misrepresentation was fraudulent – “fiction of fraud” Innocent misrep: Defendant must prove that he had reasonable grounds for believing the statement to be true Remedies for misrepresentation • Rescission Equitable remedy so may be lost through e.g. • Affirmation • Lapse of time • Impossibility • Third party rights • Section 2(2) Misrepresentation Act 1967 Damages • Contractual damages – Aim to compensate the claimant by putting them in the position they would have been in had the contract been performance properly (recovery of expectation loss). • Tortious damages – Aim to put the claimant in the position they would have been in had the wrong not happened (in this case, had the representation not been made). • Remoteness – Claimant can only recover damages if they are not too remote from the breach (i.e. were they reasonably foreseeable?)

Type of Misrepresentation Remedies available

Measureof damages

Fraudulent

Rescission (C can insist on this) Damages Indemnity payment

Tortious measure All consequential loss is recoverable

Negligent misstatement (common law)

Rescission Damages Indemnity payment

Tortious measure Only reasonably foreseeable loss is recoverable

S. 2(1) Misrepresentation Act 1967

Rescission Damages Indemnity payment

Tortious measure All consequential loss is recoverable

Innocent Misrepresentation

Rescission Damages (discretionary) Indemnity payment

Discretionary...