Misrepresentation

Misrepresentation

Definition (AO1)

• A pre-contractual -

• False statement of fact by one contrating party -

• Which induces misrepresentee to enter into contract

False Statement of fact

Definition (AO1)

A statement of fact which is untrue

• Usually by words

• May be by conduct - Silence or a deliberate concealment

(Does not actually go into the contract as would otherwise be seen as a term)

False Statement of fact - Silence

Principle (AO1)

There can be no misrep by silence

BUT

May be misrep by silence where there is a duty of disclosure.

False Statement of fact - Silence

Case (AO3)

(Spice Girls Ltd v Aprilia)

C failed to disclose Geri Halliwell was leaving the band when they signed up to sponsorship contract, this amounted to a misrep.

(Schneider v Heath) - Concealing defects

(Dimmock v Hallett) - Half-truth statement

(With v O’Flanagan) - Change in circumstances

D failed to disclose drop in turnover, when selling medical practice. He was under a duty to have advised of any significant changes before the completion of the sale of the medical practice.

False Statement of fact - Statement of intention

Definition (AO1)

Misrep of present state of mind = False statement of fact.

• Take out a loan for a set / specified purpose and this is false e.g. to buy a new car but the loan is used to pay off debts.

If intention is true at time of statement, then no misrep, even if intention is not carried out.

False Statement of fact - Statement of intention

Case (AO3)

(Edgington v Fitzmaurice)

D falsely claimed intention to use loaned funds to develop their business, not its intended purpose, which was to pay off debts.

False Statement of fact - Statement of Opinion

Principle (AO1)

Not a statement of fact

UNLESS

Opinion not generally held

OR

Opinion based on special knowledge. (from an expert)

False Statement of fact - Statement of Opinion

Cases (AO3)

(Bisset v Wilkinson)

Un-informed opinion as to how many sheep coudl graze on land - was not seen as statement of fact / a misrep.

(Esso v Marden)

Had specialist knowledge and so did amount to a misrep

Inducement

Definition (AO1)

“The misrep must induce the misrepresentee to enter into contract with misrepresentor.”

The misrep need not be the only factor in decision to contract

BUT

Misrep must play a real and substantial part in decision: Misrepresentee must prove that he would not have entered into contract but for misrep.

There is no duty on misrepresentee to check the truth of the statement of fact. (Redgrave v Hurd)

Inducement

Cases (AO3)

(Edgington v Fitzmaurice) - Need not be only factor

(Raffeisen v Royal Bank of Scotlant) - must be ‘real and substantial’

(Attwood v Small) - Not an inducement

C relied on their agent’s report in deciding to buy mine, not the D’s report which was inaccurate. No misrep as no inducement.

What will amount to misrep

(AO2)

• Statement of fact or specialist / expert opinion

• Sales talk generally won’t unless it is a specific fact

• An advert of a promise later found to be untrue

• The false statement has induced the CP.

What will not amount to misrep

(AO2)

• A statement of opinion (not from an expert)

• An advertisement gimmick which isn’t believable

• The false statement had no impact / inducement on CP to enter the contract.

Types of Misrepresentation

Definition (AO1)

1. Fraudulent Misrep

2. Negligent Misrep

3. Innocent Misrep

Consider belief of misrepresentor as this determines the remedies available.

Fraudulent Misrepresentation

Definition (AO1)

• A false statement

• Which the misrepresentor (CP making the statement) did not honestly believe to be true

i.e. A car salesman lies about the accident history of a used vehicle.

Fraudulent Misrep includes:

• Where misrepresentor knows statement is untrue

• Where misrepresentor is reckless as to the truth of the statement:

  • Has no reasonable grounds for believeing statement is true.

• Where misrepresontor deliberately ignores relevant facts

Fraudulent Misrepresentation

Case (AO3)

(Derry v Peek) - Not fraudulent Misrep

D honestly believed he would receive consent for steam trams, when they advertised for investors / share holders. Held that misrep was not fraudulent

(Hayward v Zurich Insurance) - Was fraudulent Misrep

Injured employee exaggerated seriousness of injury to be awarded an additional £100,000. Seen as fraudulent misrep.

Remedies for Fraudulent Misrep

Definition (AO1)

• Recission - Misrepresentee may avoid contract

• Damages - Under ‘tort for deceit’ (Compensated for everything that flows from the deceit

Negligent Misrepresentation

Definition (AO1)

Misrepresentation Act 1967:

s.2(1):

• Where 1 party makes a pre-contractual misrepresentation

• Misrepresentation is presumed to be negligent

• UNLESS misrepresentor can prove

  • He had reasonable grounds to believe the statement (Objective) AND

  • He did believe that statement. (Subjective)

Heavy burden on D to prove

Negligent Misrepresentation

Case (AO3)

(Howard Marine)

Checked the Lloyds Register which was wrong. Seen as negligent misrep as they could have checked the registration document which was correct and there was no reason why the Lloyds register was chosen to confirm the ship’s capacity.

Negligent Misrepresentation - Remedies

Definition (AO1)

• Rescission - Misrepresentee may avoid contract - meaning that the entire contract is set aside and the CP’s are put back to the position that they would have been in prior to making the contract

  AND / OR

• Damages - in tort - under Misrepresentation Act 1967 s.2(1) - Aim to put back in pre-contract position.

Innocent Misrepresentation

Definition (AO1)

• A false statement

• Which is not fraudulent or negligent

• Where misrepresentor:

  • Has reasonable grounds for believing the statement is true

    AND

  • Does believe the statement is true

Innocent Misrepresentation

Case (AO3)

(Redgrave v Hurd)

D failed to read papers which revealed misrep.

Holds that a contract can be rescinded for innocent misrep, even where the representee also had the chance to verify the statement.

Innocent Misrepresentation - Remedies

Definition (AO1)

• Recission - Misrepresentee may avoid the contract

  OR

• Damages - Under Misrepresentation Act 1967 s.2(2)

These are discretionary and courts may decide against remedies.