Misrepresentation Past Q A PDF

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MISREPRESENTATION Past Question & Answer  2020 A 3. David is short of money and so decides to sell some of his antique furniture. He invites Rachel, an antiques dealer, to his castle to look at a desk. He (correctly) tells Rachel that the desk was made in the 1600s. Rachel explains that antique furniture is less valuable if it has been repaired and David assures her that the desk has not been repaired. Rachel agrees to buy the desk for £20,000 and says she will collect it the next day. Later that evening David is looking for a stamp to post a letter to his brother William to tell him that he has decided to sell the furniture. He thought the stamp might have fallen behind the desk and so pulls it away from the wall. When he does so, for the first time he sees a very crude repair on the back of the desk. The next day Rachel collects and pays for the desk as arranged. Rachel is unable to resell the desk as she had planned and still has it in her shop six months later when she discovers the repair to the desk. A repaired desk is only worth £2,000. Advise Rachel as to any action for misrepresentation she may pursue against David.  2020 Oct A 5. ‘It is becoming increasingly difficult to justify the Courts’ interpretation of section 2(1) of the Misrepresentation Act 1967. Victims of an actionable misrepresentation are treated far too favourably, and the nature of the misrepresentation and its effect on the victim seem of little concern.’ Discuss  2019 A  Question 4 a) In what circumstances will the right to rescind a contract for misrepresentation be lost? b) Hitem places the following advertisement on a website offering cars for sale: ‘Stunning 2015 Mini Cooper for sale only £10,000.’ In fact the car is a 2010 model with some rust and is only worth £2,000. A 2015 Mini Cooper is worth £12,000. Advise Hitem as to his potential liability to pay damages for misrepresentation. General remarks This question was attempted by the majority of candidates. It was actually a very straightforward misrepresentation question, with clear instructions in both parts of the question as to exactly what was required. Unfortunately, those instructions were largely ignored and very many answers simply became a rambling essay packed full of cases and legislation, demonstrating plenty of knowledge but very little application to the questions asked. Very much a ‘write all you know about misrepresentation’ rather than a genuine attempt to address the issues raised. Therefore, marks were often disappointing. Part (a) required a discussion of the four bars to rescission with a supporting case for each (see extract below).

The short factual scenario in part (b) asked for advice about ‘damages’ – often there was no discussion at all about damages. Law cases, reports and other references the examiners would expect you to use In part (a): inability to make restitution (Erlanger), lapse of time (Leaf), affirmation (Peyman v Lanjani) and intervention of third party rights (Ingram v Little). In part (b): need for untrue statement of fact, discuss mere puff (Dimmock v Hallett). Discuss fraud (Derry v Peek), measure of damages (East v Maurer), explain s .2(1) Misrepresentation Act (Royscott v Rogerson), burden of proof (Howard Maine Dredging). Common errors Not answering the question. Often plenty of material in part (a) that would have been relevant in part (b) but no mention of bars to rescission. Too much discussion of how to prove misrepresentation, which belonged in part (b). No mention in part (b) of damages. Knowledge of remedies in misrepresentation was overall very poor. Many wasted time writing about possible breach of contract when the question clearly asks about damages for misrepresentation. A good answer to this question would… apply knowledge of misrepresentation to the two specific questions using relevant case law and show good knowledge of remedies and the difference between s.2(1) and fraudulent misrepresentation. Poor answers to this question… contained the errors set out above. Wasted time on breach of contract. Gave an unstructured and rambling account or alternatively a pre-prepared essay about all aspects of misrepresentation without focusing on the two distinct questions. Student extract a) Misrepresentation is an unambiguous false statement of fact in law which induces the other party to enter into the contract. (Dimmock v Hallet). When misrepresentation is proved then the misrepresented party has a right to rescind the contract under common law and Misrepresentation Act 1987. Rescission means putting both parties into their pre-contractual state where any goods or money exchanged are returned. However there are four bars to rescission and if any of these bars operate then the right to rescind has been lost. I will discuss these bars in turn. I) Where the misrepresented party is aware of the misrepresentation but still continues with the contract thus affirming it, the right to rescind is lost (Long v Lloyd). In this case the misrepresented party was aware of the misrepresentation but still continued with the contract so the court held that right to rescission was lost. Then in the case of Peyman v Lanjani a dualtest was formed which basically stated that if both parties were aware of the misrepresentation then logically the right to rescission must be lost.

II) Where there is a significant lapse of time between the contract formed and the discovery of misrepresentation, the authority on this proposition is Leaf v International Galleries, in this case there was a misrepresentation regarding a painting and a wrong painting had been perceived by the claimant who thought he was buying the painting to be one thing but it turned out to be another painting. Right of rescission was lost because there was a time lapse of about five years. Though right to rescission can be lost even when there is a much lesser time lapse. III) Where the rights of innocent third parties are involved the right to rescission will be lost. This means where the misrepresentor acquired a good product through his misrepresentation and then passed it on and sold it to an innocent third party, then under the law of misrepresentation, the innocent third party will not be asked to return the product to the first owner from whom the misrepresentor acquired that product. This is why in such a situation claimant will be advised to claim under the law for mistake because in that scenario remedy will not be available under misrepresentation because of the rights of the third party involved. IV) Where restitution is impossible because the property or goods have been consumed, used or inextricably mixed, the right to rescission will be lost. The authority in this proposition in Clark v Dickinson. Restitution was not available in the above mentioned case but nonetheless it was established if there was a possibility to mitigate or compensate the effects of misrepresentation by giving the money then this can be used. Restitution means putting the parties in a position in which they were before the contract. There were the bars to rescission which if operative do not allow the right to rescind the contract. Comments on extract This excellent answer with an equally good section (b) scored a high first. It is a clear answer to the question asked, explains each of the four bars and includes relevant supporting case law.  2019 B  Question 5 Sanjit wishes to buy a sports car and visits Marcella, a car dealer. Sanjit immediately falls in love with a vehicle known as a Land Patrol, which Marcella describes as ‘the most reliable car on the road’. He asks Marcella about the age of the vehicle. Marcella consults the Land Patrol’s documentation and sees that it is written in Italian. Marcella’s Italian language skills are very basic but he has an attempt at deciphering the information and eventually informs Sanjit that the car is ‘brand new’. Sanjit glances at the registration plate of the vehicle and notices that the registration would suggest that the vehicle is older than Marcella has claimed. Sanjit suspects, but is not certain, that Marcella has given him incorrect information about the age of the car. Sanjit decides to buy the car. Over the course of a few weeks, various defects appear in the car which cost Sanjit £1,000 to repair. Finally, one morning the car will not start and Sanjit has to spend £500 in taxi fares that week to commute to his work place. He then finds out that the car is not brand new but eight years old. Advise Marcella as to her potential liability to pay damages for misrepresentation.

General remarks A traditional problem question on misrepresentation answered by large numbers of candidates and mostly reasonably well. It needs a logical and structured approach, starting with a definition of misrepresentation then working through the facts identifying the key elements and applying relevant case law at each point. The rubric is very specific – discuss damages for misrepresentation – many candidates wasted time taking about the possibility of a breach of contract. Candidates need to identify the two statements made ‘most reliable car on the road’ (probably mere puff) and ‘brand new’ (probably misrepresentation). Consider whether S was induced by this statement to enter the contract or whether his suspicions counteract that. Go on to consider the types of misrepresentation and the remedies available. Generally, candidates were less good in looking at the remedies. Law cases, reports and other references the examiners would expect you to use Give standard definition of misrepresentation. Distinguish mere puff (Dimmock v Hallett). Is Marcella an expert (Smith v Land and Properties)? Is there reliance by Sanjit (Museprime v Adhill)? Doesn’t have to be the only inducement (Edgington v Fitzmaurice, Hayward v Zurich). Opportunity to verify (Atwood v Small). Discuss fraud (Derry v Peek), measure of damages (East v Maurer), explain s.2(1) Misrepresentation Act, Royscott v Rogerson, burden of proof Howard Maine Dredging. Discuss tortious measure of damages. Common errors Not addressing the facts and writing ‘all you know’ about misrepresentation essay. Not spotting the inducement point and whether Sanjit’s suspicions made a difference. Writing about the possibility of a claim for breach of contract, ignoring the rubric that refers to misrepresentation. A good answer to this question would… be clearly structured identifying the possible misrepresentation statements, exploring whether it induced the contract then taking time to discuss the types of misrepresentation and the remedies flowing from it with supporting case law. Poor answers to this question… wrote a generic essay on misrepresentation with no application to the facts. Student extract Misrepresentation is a false statement of fact or law. A statement of opinion is not a representation. (Bissett v Wilkinson). The statements that must be evaluated here are, when she said ‘the most reliable car on the road’, and when she said the car was ‘brand new’. Let’s first check whether they are false statement of fact or not. ‘Best car on the road’ sounds like a ‘mere puff’, which is a statement of opinion (Dimmock v Halett). But if the person who’s making the statement can be regarded as someone who should know the facts that are true, in this case Marcella is a car dealer, a[n] opinion like that can

become a statement of fact (Smith v Land and Properties Ltd). I would argue this was a statement of fact. And the statement ‘brand new’ also a statement of fact. Reliance For statements to be actionable, it must be relied upon and made material. Made material basically means, any reasonable person would be induced by such statements (Museprime Properties v Adhill Properties). It can’t be actionable if representee wasn’t aware of the representation (Horsefall v Thomas), and did not rely upon the misrepresentation. It doesn’t have to be the only inducement (Edgington v Fitzmaurice). Here it is reasonable to expect, a reasonable person would be induced by these statements. Sanjit was already in love with this car, before Marcella made those statements. But he did ask the age of the vehicle. Where Marcella wrongly replied ‘brand new’. It could have been an important deciding factor for him if he knew it wasn’t new. So, it can be argued he relied upon that statement. As we mentioned before no need for it to be the only inducement (Edgington v Fitzmaurice). When she glanced over the resignation, and couldn’t read the manual, she should have informed Sanjit, as half-truth (Nottingham Brick and Tile Co v Butler) and change of circumstances can be regarded as misrepresentation. (With v O’Flanagan). So, I think it’s sufficiently clear, that Sanjit relied on the statement. So, now the question is what type of misrepresentation might be brought against Marcella. Comments on extract A good structure with a defined section on reliance/inducement and good supporting cases. Candidate then went on to discuss types of misrepresentation and remedies in a bit less detail and scored a mid 2:1.  2019 Oct 4. ‘In English law damages for misrepresentation may be recovered through a number of different actions. The situation is far from satisfactory.’ Discuss  2018 A  Question 6 Hamad is fed up of working as a busy and successful male model. He decides to open a coffee shop. He has heard that Imogen is interested in selling her coffee shop located in a trendy part of town. On 1st January Hamad and Imogen meet to discuss the terms of a sale. Imogen tells Hamad that the coffee shop is making a profit of £5,000 per month. She produces a set of accounts which Hamad inspects and which supports her statement. Hamad is confident that his reputation will enable him to increase profits by 50%. On 1st March Hamad agrees to buy the coffee shop for £500,000 and opens for business two months later after he has spent £100,000 refurbishing the coffee shop. Hamad operates the coffee shop for three months but the profits never exceed £2,000 per month because Starbursts, a national coffee shop chain, opened a coffee shop a few streets away on 1st February. Imogen met a friend for a coffee in the new Starbursts on its opening day. Hamad is especially annoyed as if he had not bought the coffee shop he would have invested the money in his sister’s internet company which is now making large

profits. Advise Hamad as to whether on the above facts Imogen is liable to him under the law of misrepresentation. General remarks A popular question reasonably well answered. The main fault was to write all about misrepresentation, quoting cases and principles but failing to apply them to the particular facts of the question. Law cases, reports and other references the examiners would expect you to use Define misrepresentation. Consider statement which was true but subsequently became untrue: With v O’Flanagan; Aprilia v Spice Girls. Explain the remedy of rescission and the bars which might prevent it. Insufficient lapse of time here: Leaf, Salt. Possible inability to restore to previous position because of refurbishment: Erlanger, Salt. Misrepresentation Act s.2(2). Consider damages – was Imogen fraudulent: Derry v Peek? Damages for fraud could include lost profits from alternative business venture: East v Maurer. Measure of damages: Royscott. Advantages of reverse burden of proof under s.2(1) Misrepresentation Act: Howard Marine Dredging v Ogden. Common errors The question asks for a discussion about misrepresentation, so no need to consider whether any of the statements are terms or discuss breach of contract. Much time was wasted on this. Often very little discussion of remedies. A good answer to this question would… carefully apply the law to the facts identifying the statements made, the changing circumstances and the remedies available to Hamad. Poor answers to this question… were generic essays about misrepresentation without applying it to the facts and did not identify the specific types of misrepresentation and the remedies available to Hamad. Student extract It can be confidently argued that the statement by Imogen is an unambiguous statement. It must be then considered if it is false or not. A statement is false even when it is misleading, half truth or is rendered false due to change in circumstances (With v O’Flanagan). Therefore, since due to opening of Starbursts, the sales have been affected, it can be argued that ‘£5,000 per month’ was a continued representation, thus becoming false. Opening of a new shop of coffee changed the circumstances. Next, it must be considered that whether there was a duty of Imogen to make a statement about new circumstances since the change occurred in Feb and Hammad and Imogen contracted in March. The general rule is that there is no duty to disclose fact (Keates v Earl of Cadogan). However exceptions apply in case of fiduciary relationship, when there is disclosure of half truth which is misleading and when circumstances are changed giving rise to a need for making a statement (Spice Girls v Aprilia). In these circumstances when

a new shop was opened and in knowledge of Imogen (the representor), she must have informed Hammad about it since it can be argued that Imogen, being an expert (as was running a business) must have realised the consequences. Therefore failure to disclose and make a statement is a misrepresentation. The last requirement of misrepresentation is that induces the party to a contract (Edgington v Fritz Maurice [sic]). However, there are certain exceptions to the rule of inducement which includes the knowledge that statement is untrue (Redgrave V Hurd), not in this scenario as Hammad did not have an idea. The second is reliance on another inducement (Allwood v Small), which clearly cannot be seen, he relied on Imogen’s statement. Third is when representation unknown (Thomas v Horsefield) which is not applicable here and last is when the person would have contracted anyways (Atlantic Lives v Baron). Thus none of these exceptions is valid and therefore it can be argued that Imogen’s statement induced him, on which he relied and contracted. However, it can also be argued that it was not the sole inducement as the facts shows that he was confident due to his reputation. But, the law is that inducement must be substantial but need not be sole. (Edington v Fitzmaurice). After establishing that a misrepresentation is made, the type of misrepresentation must be considered. A misrepresentation may be fraudulent (Derry v Peek), negligent (Hedley v Heller), innocent or statutory (Foster v Action Aviation). Fraudulent is when the requirements of Derry v Peek satisfied. These include knowledge or recklessness of untruth or when it is likely that the statement may not be true, Burden of proof is on Claimant. In this scenario, it can be argued that it was fraudulent misrepresentation because the later circumstances rendered it untrue although not when made, and Imogen was aware of these circumstances thus requirement of Derry v Peek are satisfied and it may be a fraudulent one. It can also be argued that it was negligent misrepresentation, as Imogen was negligent as to the changed circumstances. For negligent, we must established that there was a duty and that duty was breached. Burden of proof on Claimant. This argument is also likely to sustain. Another type is innocent misrepresentation which is unlikely here as Imogen was aware of it. With considering all this, it is more beneficial for Hammad to claim under the Misrepresentation Act. He can claim under S.2(1) of the Act. The remedies for misrepresentation includes rescission i.e. putting parties in position had the contract not have been and damages for this scenario, it is likely that both damages will be available for rescission it must be noted if there is any bars for rescission (Clarke v Dickson), transfer to third party (Campbell), time lapse (Leaf v International Galleries) and the affirmation of contract often misrepresentation (Long v Lloyd). It can be stated that none is applicable here therefore there would be rescission possible. Under the Act s.2 (1) – (Howard Marine v Agden) damages will be extensive, even if it is negligent misrepresentation damages would be same as that of fraudulent (Royscot v Rodgerson). Under the common law, Hammad can claim und...