Misrepresentation - Notes used for open book exam - achieved 1st class mark PDF

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Summary

Misrepresentation No general duty of disclosure during negotiation  But duty not to make false statements of fact/law to induce the other party into contracting  Induces the party to contract but isn’t a term of contract  not a mere promise/ contractual term  Distinguish : (i) Term - parties in...

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Misrepresentation 

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No general duty of disclosure during negotiation  But duty not to make false statements of fact/law to induce the other party into contracting Induces the party to contract but isn’t a term of contract  not a mere promise/ contractual term Distinguish: (i) Term - parties intended for it to be a term (i.e. to provide warranty/guarantee/promise as to statement’s accuracy (Oscar Chess Ltd v Williams; Dick Bentley Productions v Harold Smith) (ii) Promise -an undertaking to do/not to do something creating an expectation protected by law (iii) Representation -asserts existence of a given state of affairs, either true or false + invites reliance w/out constituting an undertaking to bring about that state of affairs Requirements 1) unambiguous 2) false 3) statement  some positive conduct (written, oral etc.)  silence is insufficient (With v O’Flanagan) nor mere failure to disclose 4) of existing fact or law  NOT if: i) mere puff – statement that’s too vague  the more specific, the less likely to be a mere puff ii) honestly held statement of opinion/belief which proves to be unfounded (Bisset v Wilkinson) a. where representor has greater knowledge/special skill, court will imply that representation must be made w/reasonable care & skill(Esso Petroleum v Mardon) b. facts are known to both parties = what one says to another is often merely expression of opinion iii) astatement of intent unless D misstates his present intention ( Edgington v Fitzmaurice)  But courts are flexible in defining a ‘statement’  can be made by conduct or words 5) addressed to the party misled  by direct communication  by communication to TPw/intent to be passed on to C 6) which induced C to enter into contract  doesn’t have to besole inducementactively present in representee’s mind (Edgington v Fitzmaurice)  Ccan’t show inducement where he was: a. unaware of representation b. knew it wasn’ttrue c. didn’t allow it to affect his judgment d. placed reliance on TP when entering into contract e. D corrected him & drew attn. to correction prior to any reliance  not sufficient that C could have discovered the truth  he must have actually discovered it!

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7) ... and was material (possibly)  meaning unclearstatement which would affectthe judgment of reasonable man on whether to contract on those terms Types  All entitle representee to rescind but not all give rise to action for damages!! 1) Fraudulent = rescission +tort of deceit (Derry v Peek) i) proof of fraudfalse representation made either: a. knowingly b. w/out belief in its truth c. recklessly/carelessly whether it’s true or false  unreasonableness of belief doesn’t constitute fraud but provides evidence of dishonesty ii) D’s motive is immaterial  deceit is not likely to be invoked  fraud is very difficult to prove ( Smith New Court Securities v Scrimgeour Vickers Ltd) 2) Negligent - Common Law  Hedley Byrne- assumption of responsibility(doesn’t have to be voluntary) + foreseeable detrimental reliance of Cobjective test  principal factors in determining scope: (i) representor’s knowledge  the greater his knowledge of representee + purposes for which he’s likely to rely, the more likely it is thathe’s liable  possibly, requirement of special skill (ii) purpose for which statement was made by representor  w/intent forrepresentee to rely = likely liable  general public circulation = unlikely liable (iii) was it reasonable for representee to rely on the statement?  made on social occasion =unlikely  made in commercial context =likely 3) Negligent/Purely Innocent– s2(1) 1967 Act  Where misrepismade by one contracting party to another, he’s liable for damages unless a. had reasonable grounds to believe; and b. did believe up until the time when contract was made c. that statement he was making was true (operates independently of Hedley Byrne)  Advantages of using this over common law a) don’t need to satisfyHedley Byrne b) burden of proof on representor  not easy to discharge (likely to recover even if fails @ common law) (Howard Marine v Odgen) c) damages = tort of deceit (as if D has been fraudulent)  C must have recourse to a common law claim where i. Representation was made by TP - s2(1) only applies where misrepwasmade by contr. party ii. Contract is void ab initio(e.g. b/c of non est factum ) = no contract to which s2(1) could apply 4) Innocent misrep – neither negligent/nor fraudulent Remedies  A party induced into contract by misrep. can seek remedy in either: (a) contract

(b) tort (c) restitution 1) Rescission –contract set aside for all purposes (retrospectively & prospectively)+ aim to restore parties as far as possible back to position they would have been in but formisrep  No contr. damages but could claim in tort/statute+ restitution  Available for all types, subject to court’s discretion to award damages in lieu under s2(2) 1967 Act  C has a right of election if chooses to rescind, must notify representor of his decision by: a. seeking a declaration that contract’s invalid b. restoring what he’s obtained under contract c. relying upon misrep as defence to an action on the contract (Redgrave v Hurd)  If D deliberately makes it hard/impossible for Cgive notice, some evidence of trying will suffice, as long as reasonable in the circumstances (Car & Universal Finance Co v Caldwell)  C may lose right to rescind by: a. affirming the contract w/Dafter discovering thetruth b. BF purchaser for value acquires goods b/f contract has been set aside c. lapse of time unless fraudulent misrep (Leaf v International Galleries) d. where it’s impossible to restore parties back to pre-contractual position (main one) - C must make restitution to D for the benefit he received, since D is making restitution to him = C can’t get back what he’s parted with & keep what he’s received  precise restitution required @common law but in equity party who make substantial but not precise restitution can rescind if he returns the subject matter of contract in altered form + gives acc. of profits made with allowance for deterioration of the product 2) Damages – no claim for contractual damages where contract’ has been rescinded but might claim in tort/under statute/personal restitutionary claim  Contract rescinded = no contr. damages, could claim under statute/in tort  Contract not rescinded =claim for contr. damages only if misrep, incorporated as contractual term (i) Fraudulent misrep  Damages in tort of deceit  Reliance interest  Damage directly flowing from inducement, not rendered too remote by C’s own conduct, regardless of whether D could have foreseen such loss  Aggravated damages possible to compensate C for injury of his feelings  Loss of opportunity (East v Mauren) (ii) Negligent misrep. a) Common Law  a tort = reliance interest  remoteness:liable for all losses reasonably foreseeable consequences of misrep (The Wagon Mound)  C’s contributory negligence could reduce damages payable to him b) s2(1) 1967 Act (Royscot v Rogerson)

measure of damages = tort of deceit reliance interest damages assessed as if representor was fraudulent C’s contributory negligence could reduce amount of damages payable  remoteness rules of deceit apply (not of negligence)  reduce practical significance of tort of deceit  no justification for treating innocent party as if he had been fraudulent!!if Supreme Court doesn’t overrule it, legislation should interfere & apply rules of negligence to measure damages (iii) Innocent misrep.  no damages/not a tort  rescission/indemnity available  in practice rule mitigated by courts finding it was a contractual term, enforceable as collateral contract [although the need for this reduced by s2(2) 1967 Act)  measure should be less than in s2(1) b/c representor is less culpable (iv) Damages awarded in lieu of rescission  Courts consider a. nature of misrep b. loss which would be caused if contract was upheld/ rescinded  Discretion broad = do what’s equitable  Most likely to invoke s(2) where representee induced by misrep to enter into bad bargain (WilliamSindall v Cambridge)  Measure of damages: reliance  Where C has right to rescind but loses it due to lapse of time...  Unclear if also loses right to claim damages under s2(2) a. No - provided he had a right to rescind in the past (Thomas Witter) b. loss of right to rescind takes away court’s discretion to award damages under s2(2) Government ofZanzibar v British Aerospace  b. is strongest, consistent w/literal reading of s2(2) but may be undesirable in policy terms, b/c will mean C who lost right to rescind will always go empty handed Excluding Liability for Misrep a) Common law - can’t exclude liability for fraudulent misrepbutcanforothers, subject to rules of construction & incorporation o Ways to exclude (Axa) (a) Exclusion clause – s3 1967 Act (b) Non reliance clause – misrepresentee didn’t rely (c) Estoppel by convention – parties have agreed on it b) s3 1967 Act (amended by s8 UCTA) - limits parties’ freedom to exclude liability for consequences of misrep – term not valid if doesn’t satisfy test of reasonableness (burden of proof on party showing that it does) applicable to business & consumer liability    

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