Misrepresentation 2 PDF

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Misrepresentation 2...

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Misrepresentation 2- Remedies  Remedies  Common law ◦ Rescission ◦ Damages ◦ Indemnity 

Statute – Misrepresentation Act 1967 ◦ Damages

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Types of Misrepresentation Fraudulent Misrepresentation

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Negligent Misrepresentation

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Innocent Misrepresentation

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Negligent Misstatement Fraudulent Misrepresentation Tort of deceit. Lord Herschell- Derry v Peek (1889)- it must be proved that the false representation was made knowingly, or without belief in its truth or recklessly, careless as to whether it is true or false. Negligence is not sufficient, there has to be an element of dishonesty. Negligent Misrepresentation This is provided for under the Misrepresentation Act 1967.

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Where a false statement is made, the burden of proof shifts to the defendant to show that there were reasonable grounds for believing that statement to be true.

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Otherwise, negligence will be assumed. Innocent Misrepresentation Here, the misrepresentation is neither fraudulent nor negligent.

The party has made a statement with an honest belief in its truth and has reasonable grounds for that belief.  Negligent Misstatement  Hedley Byrne & Co v Heller & Partners Ltd (1964).  Caparo Industries Plc v Dickman (1990).  A duty of care must exist.  There must be reasonable reliance.  Sufficient proximity between the parties.  It must be just and reasonable to impose the duty of care.  Rescission  Available for fraudulent, negligent and innocent misrepresentation. 

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Note, in certain circumstances, the court has a discretion under Sec 2(2) Misrepresentation Act 1967 to award damages in lieu of rescission for an innocent misrepresentation. But, the right to rescission is lost by: ◦ Affirmation – Long v Lloyd (1958) ◦ Lapse of time – Leaf v International Galleries (1950) ◦ Impossibility of restitution – Clarke v Dickson (1858) ◦ Rights of third parties affected – Lewis v Averay (1972) Rescission contd. A contract is not automatically rescinded because of a misrepresentation. The contract is ‘voidable’ and not ‘void’. The choice as to rescind or not rests with the aggrieved party. Until that choice is made, the contract remains valid and enforceable. To rescind the contract, the aggrieved party is expected to give notice to the other party. Damages at Common Law Available where the statement is made ◦ Fraudulently – tort of deceit - Derry v Peek (1889)  Knowing it is false  Reckless disregard for the truth ◦ Negligently – negligent misstatements-under the tort of negligence, using the Hedley Byrne v Heller (1964) principles

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Not available for innocent (non-negligent) misrepresentation.

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Indemnity Operates alongside rescission. Allows recovery for necessary expenses which are directly related to obligations arising from the contract. ◦ Whittington v Seale-Hayne (1900)

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The claim for indemnity is quite limited in scope. Damages under statute Misrepresentation Act 1967 ◦ s 2(1) –  damages where that would have been available if statement was fraudulent  Liability unless defendant proves reasonable grounds for believing statement was true – Howard Marine Dredging v Ogden (1978)  Measure of damages – same as for tort of deceit – Royscot Trust v Rogerson (1991) ◦ s 2(2)- Damages in lieu of rescission

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Exclusion of Liability for Misrepresentation s 3 Misrepresentation Act 1967 as amended by s 8 Unfair Contract Terms Act (UCTA)1977 restricts the possibility of excluding liability for misrepresentation.

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Such an exclusion by way of a contract term shall have no effect except it satisfies the requirement of reasonableness under the UCTA 1977.

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Next week Nathan- Exclusion Clauses 1 & 2...