Misrepresentation PDF

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A party who can prove they entered a contract having relied on a false or misleading statement made by the other party may have a remedy for misrepresentmisrepresentation, all of which need to be shown if liability is to be established:ation. There are three elements in A false statement of fact or ...

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A party who can prove they entered a contract having relied on a false or misleading statement made by the other party may have a remedy for misrepresentation. There are three elements in misrepresentation, all of which need to be shown if liability is to be established: 1) A false statement of fact or law; 2) made by one party to the other 3) which ‘induced’ the contract, meaning it was relied upon in deciding to enter the contract. The remedies for misrepresentation are either rescission, which means returning the parties to their pre-contract position including returning any money paid and any property transferred, or damages, meaning financial compensation, or in a suitable case both of these. 1. MISREPRESENTATION - means a false representation. 2. REPRESENTATIONS, PUFFS AND CONTRACT TERMS A representation has to be distinguished from a ‘puff’ which means mere sales talk or a statement so vague or overblown that no reasonable person would rely on it. There is no liability for a mere puff. 

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Dimmock v Hallet (1866) LR 2 Ch App 21 - The seller of land described it as ‘fertile and improvable’. This was held to be a puff and insufficiently specific to amount to a representation.

REPRESENTATIONS IN WRITING, BY WORD OR MOUTH, OR BY CONDUCT

There are no limits on the form a representation can take, as long as its meaning is clear. A representation can be made orally or in writing, and in suitable cases may be found to have been made by conduct. 

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Walters v Morgan (1861) 3 DF & J 718 - So a nod of the head or a thumbs-up in response to a question may be taken to be a representation of assent by conduct.

THE ELEMENTS OF MISREPRESENTATION

The elements to misrepresentation all of which need to be shown if liability is to be established: A false statement of existing fact or law, made by one party to the other which ‘induced’ the contract, meaning it was relied upon in deciding to enter the contract. Each of these elements will now be looked at in turn. a) FALSE STATEMENT OF EXISTING FACT OR LAW i)

Opinion.

There is generally no liability for statements of opinion as opposed to statements of fact. 

Bisset v Wilkinson [1927] AC 177

Nevertheless the distinction between fact and opinion is not always clear-cut.



Smith v Land & House Property Corp (1884) 28 Ch. D. 7

If the maker of the statement has, or claims to have, some special skill or knowledge about the matter his opinion will be treated as a statement of fact. 

Esso Petroleum Co Ltd v Mardon [1976] QB 801

ii)

Statements of Law - the courts recently having developed the law so that there can now be liability for misrepresentations of law

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Kleinwort Benson v Lincoln CC [1999] 1 AC 153 - the House of Lords suggested that the courts may change their approach and hold that misrepresentations of pure law may be actionable.

. iii) Statements as to future intention - will not per se be an actionable for misrepresentation unless it can be demonstrated that at the time the person made that statement they had no such intention.

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Edgington v Fitzmaurice (1885) 29 ChD 45

iv) Silence - The general rule is that silence is not a representation and so cannot be a misrepresentation. v) Fletcher v Krell (1872) 42 LJQB 55 - The information of the condition of a house is for the buyer to find out, not the seller to disclose the information. Misrepresentations can in appropriate circumstances be inferred from conduct, and the courts have sometimes been able to mitigate the apparent harshness of the rule that silence is not a misrepresentation by being able to find a misrepresentation by conduct. 

Spice Girls Ltd v Aprilia World Services BV [2002] EWCA 27

No general duty to disclose information so that merely keeping quiet about something is not ordinarily a misrepresentation there are exceptions to this: Partial revelation or half truths – There is no duty on a person to offer information, but if they do so it should be the whole picture: 

Dimmock v Hallet (1866) LR 2 Ch App 21

Change of circumstances or subsequent falsity – A representation may be true when it is made but become false later before the contract is concluded. 

With v O’Flanagan [1936] Ch 575

Where contract is uberrimae fidei (of the utmost good faith) – Some contracts have a duty of disclosure of any material facts whether or not these are asked for. Contracts involving fiduciary relationships – Where there is a contract between parties, one of whom reposes trust and confidence in the other, the law imposes a duty of disclosure – e.g. solicitor and client, principal and agent, partners. b)

MADE BY ONE PARTY TO THE CONTRACT TO THE OTHER

The misrepresentation must be addressed to the party misled, either directly communicated or with the intention that a third party will pass it on. c)

INDUCEMENT .

In order to have an action for misrepresentation the statement made must have induced the contract. 

Horsfall v Thomas (1862) 1 H & C 90

In order to amount the inducement the misrepresentation need not be the sole or main reason for entering into the contract as long as it is one of the reasons.



Edgington v Fitzmaurice (1885) 29 ChD 459

If the misrepresentation had no effect on the representee’s decision to contract and the contract would have been entered into even without the misrepresentation then there is no reliance or inducement and no liability in misrepresentation. 

JEB Fasteners v Marks, Bloom and Co [1983] 1 All ER 583

The modern approach of the courts to the issue of whether or not the representee had been induced by the misrepresentation is to determine whether or not a reasonable person would have been induced by the statement. 

Musprime Properties Ltd v Adhill Properties Ltd (1991) 61 P & C R 11

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County NatWest v Barton [2002] 4 All ER 494.

However, if the misrepresentation would not have induced a reasonable person then it is for the representee to show that he was actually induced by the statements made. 

Dadourian Group International Inc v Simms [2009] EWCA Viv 169.

It is insufficient to demonstrate that the other party supported or encouraged the decision. 

Raiffeisen Zetral Bank Osterreich AG v Royal Bank of Scotland plc [2010] EWHC All ER 111 - The misrepresentation must be a real or substantial part in inducing the contract.

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Attwood v Small (1836) 6 Cl & F 232 - There is no reliance if the representee chooses to rely on his own judgment or investigation rather than the statement of the representor.

The traditional rule is that if the representee had the opportunity to discover the truth but failed to take it that does not negative reliance so as to free the defendant from liability for misrepresentation. 

Redgrave v Hurd (1881) 20 Ch D 1

TYPES OF MISREPRESENTATION 1. Fraudulent Misrepresentation - requires the claimant to prove that the maker knew or had no belief in the truth of the statement or was recklessly careless as to its truth.

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Derry v Peak (1889) 14 App Cas 337. The burden of proof is higher than for an action under either the Misrepresentation Act 1967

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Hedley Byrne v Heller [1964] AC 645.

The remedy of rescission is available subject to the limitations outlined below. Damages are recoverable under the tort of deceit and allow for all consequential losses. 

Dolby v Olby (Ironmongers ) Ltd [1969] 2 QB 158.

This may be more generous than an action for breach of contract which will not usually allow for the recovery of non-pecuniary losses. BSky B v Eds [2010] EWHC 86.

2. Misrepresentation under the Misrepresentation Act 1967. s.2(1) 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 has suffered loss, then, if the person making the misrepresentation would be liable to 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 he had reasonable ground to believe and did believe up to the time the contract was made that the facts represented were true.

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Howard Marine and Dredging Co. Ltd v Ogden & sons (Excavations) Ltd [1978] QB 574.

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Thomas Witter Ltd v TBP Industries Ltd [1996] 2 All ER 573 - claimant may still claim innocent misrepresentation if the defendant establishes his honest belief in the statement made.

Rescission is as with all types of misrepresentation available as a remedy subject to its limitations below. This section is unusual in the way that it relates liability to the concepts of fraudulent misrepresentation. 

Royscott Trust Ltd v Rogerson [1991] 2 QB 297.

Innocent Misrepresentation applies where a misrepresentation is made entirely without fault. The remedy of rescission can be granted or damages in lieu under s.2 (2) at the discretion of the court. Section 2(2) Misrepresentation Act 1967 Where a person has entered into a contract after a misrepresentation has made other than fraudulently and that person is entitled to rescind the contract as a result the court may, if it considers it equitable to do so award damages in lieu of rescission. 

William Sindall plc v Cambridgeshire CC [1994] 1 WLR 1016

Under s.3 of the Misrpepresentation Act 1967 liability can be limited or excluded subject to satisfying the s.11 reasonableness under UCTA 1977. 3. Negligent Misrepresentation at Common Law.

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Hedley Byrne v Heller [1964] AC 645- this case allowed for recovery where statements were negligently

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, Caparo Industries plc v Dickman [1990] 1 All ER 568 or that the defendant had voluntarily assumed responsibility of the statement made

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Spring v Guardian Assurance plc [1995] 2 AC 296.

4. RESCISSION Rescission in the context of misrepresentation means returning the parties to their pre-contract positions a. HOW TO RESCIND The right to rescind is initially exercised by the misrepresentee giving notice to the misrepresentor. The parties can arrange for return of money and property transferred without reference to the court, and for this reason rescission is sometimes described as a self-help remedy. 

Car & Universal Finance v Caldwell [1965] 1 QB 525

b. BARS TO RESCISSION The misrepresentee’s right to rescind is lost in four circumstances. These four circumstances are known as the ‘bars’ to rescission. 1) Affirmation If after discovering the falsity of the representation the misrepresentee continues with the contract he will be said to have affirmed the contract and lost the right to rescind. 

Long v Lloyd [1927] AC 177

2) Lapse of time Even if the misrepresentee acts promptly to rescind on discovery of the truth it may still be too late to rescind if too much time has elapsed. 

Leaf v International Galleries [1950] 2 KB 86

3) Restitution is impossible If the property given for the money is no longer available because, rescission will not be available and the misrepresentee will be limited to a remedy, if any, in damages. 4) Nevertheless in deciding whether restitution is possible, the courts have shown some flexibility and allowed rescission where substantial restitution can be done between the parties. 

Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218

5) Third party rights Rescission will be denied if property passed under the contract can no longer be returned because it has already passed to a third party who has bought in good faith prior to the rescission. The timing of the acquisition by the good faith third party is crucial. 

White v Garden (1851) 10 CB 919....