Misrepresentation (cases and principles)

Redgrave v Hurd

misrepresented the annual profit of a law firm during sale of house and to join a law firm

failed to inspect papers that revealed that the defendant had not in fact made up the difference in supposed income

later failed to complete the transaction

sufficient that the defendant had relied on the misrepresentation, did not matter that he had not taken the opportunity presented to discover the truth.

Jessel MR: ‘a man is not to be allowed to get a benefit from a statement which he now admits to be false’

contract can be rescinded for ‘non-fraudulent’ representations

Edgington v Fitzmaurice

prospectus stated that funds raised from shares would be used in business development whereas in reality it was to pay off liabilities.

clear statement of intention held to be false and fraudulent representation of fact

does not have to be the only factor in reliance upon which the contract is entered (claimant also considered the charge involved)

Bowen: state of mind is a fact (even if difficult to prove)

Bisset v Wilkinson

statement of mere opinion if reasonably made is not an actionable misrepresentation provided that the parties understand it is not made on any factual basis.

sale of land - mentioned capacity of sheep despite having not farmed sheep.

both parties were aware that the land had never been used to farm sheep ie the capacity had never been practically ascertained. nor was it proven otherwise.

With v O’Flanagan

failure to correct a prior representation which has been subsequently falsified constituted an actionable misrepresentation

sale of a medical practice - the earnings of which decreased during negotiations

Wright: ‘under obligation to disclose the change of circumstances’

Hayward v Zurich Insurance

actionable misrepresentation = false statement o fact or law made by representor to representee that reasonably induces A to contract with B

Exaggerated extent of work injury. By the time of settlement insurer had evidence and established that he was fully recovered a year earlier.

Found for the employee because the insurer was aware of the fraud at the time of settlement so could not set aside the settlement.

Car and Universal Finance v Caldwell

owner of a jaguar induced by fraud to sell to a rogue; owner immediately reported to the police. Car sold on to D.

reporting to the police sufficed to rescind the contract ie D got no title to the car.

the fact that ‘another innocent party may suffer does not … justify imposing on a defrauded seller an impossible task’

if impossible to communicate, can rescind a contract without communication

rescission is barred where the subject matter is sold to a 3rd party BF purchaser without notice of the misrepresentation before any intention to rescind has been communicated

Leaf v International Galleries

innocent misrepresentation as to the artist of a picture. 5 years later sought rescission.

lapse of time meant that ‘it would be inequitable in all the circumstances to grant rescission’, even though rescission was sought promptly on discovery of the truth

contested case and confined to innocent misrepresentation in sale of goods cases

Salt v Stratstone

2 years after purchase of a title, discovered misrepresentation. rescission granted.

neither depreciation of the car nor its intermittent enjoyment should be regarded as reasons for saying that rescission is impossible

damages in lieu only available if rescission is

Misrepresentation Act 1967 s2.2

where entered into a contract by non-fraudulent representation then they have the right to rescind or have damages declared instead of rescission if equitable to do so regarding the nature of the misrepresentation and the loss

Derry v Peek

tram company issued prospectus falsely claiming that it had authorisation to use steam power despite having not sought permission which was subsequently denied

found for the tram company as the statements were not fraudulent because they honestly believed them to be true

Doyle v Olby

claimant induced through fraudulent representations to buy a business and made a heavy loss

damages awarded

object in tort is to compensate the claimant for all that is lost, not to be put in the position as if it were fulfilled because that was never an existing circumstance

wider than the ‘reasonable foreseeability test’

Smith New Court v Scrimgeour Vickers

sale of hotel which had a tenant - described the tenant favourably even though he was in arrears and became bankrupt. purchaser refused to complete.

the buyer had no knowledge of the tenant so the seller’s description was a representation

where there is a significant disparity in the relative knowledge or means of obtaining knowledge the, the person who gives his opinion may be impliedly making a representation that he has reasonable grounds for holding that opinion

East v Maurer

falsely claimed to stop working at other salon after sale which caused loss to the buyer

buyer entitled to the losses made from purchase/sale of the salon but also for potential profits for potential purchase of another similar hair salon

in cases of fraud may be entitled to damages for loss of chance for what they would have done had they not been induced by the misrepresentation

Hedley Byrne v Heller

advertising agency sought information on potential creditworthiness of client from their bank, who confirmed with the disclaimer ‘without responsibility on the part of this bank’

this induced the agency to enter into a contract and subsequently lose money as the client went into liquidation

the disclaimer had excluded liability for duty of care

negligent words treated differently from negligent acts

Esso Petroleum v Mardon

forecast made with special knowledge amounts to statement of fact that can be actionable

induced lease of petrol station based on its estimated annual throughput but failed to take into account planning authority denying access from the main street

tenant failed to make rent payments

found tenant entitled to damages due to a collateral warranty or negligent misrepresentation as the owner had a special skill and was thus under a duty to use it.

Misrepresentation Act 1967

if the person would have been liable in damages had the representation been made fraudulently then they are liable even if innocent unless he had good grounds to believe and did believe up to the point of contract that the facts were true

Royscot v Rogerson

car dealer induced finance company to enter into a hire purchase agreement with a customer by misrepresenting the deposit paid

customer defaulted on payments and sold the car on

finance company sued under s2.1 for difference in price paid and instalments. allowed because the sale of the car was not too remote

not subject to foreseeability

Sindall v Cambridgeshire CC

purchase land for redevelopment. council represented that they were not aware of any easements over the land however private sewer found under the site. separately, the value of the site decreased by £3m due to market conditions

statements did not amount to misrepresentation therefore not entitled to rescind

court must consider

• nature of misrepresentation

• importance in relation to the subject matter

• whether it would be fitting to remedy through rescission rather than damages

Howard Marine v Dredging

burden of proof on the misrepresentor to prove that he had reasonable grounds for belief in the accuracy

no need for duty of care

hire of barges to transport clay

misunderstanding as to capacity based on different sources of information

Oscar Chess v Williams

represented different, less valuable model of car

claim brought on the grounds that the model of the car was a term of sale

rather an innocent misrepresentation

test for incorporation of representations (Denning):

• intention inferred from the perspective of an objective bystander

• something within the knowledge of the representor but not the representee, said with the intention that the representee act on it

• unless made clear that the seller has no knowledge of his own

Dick Bentley v Harold Smith

second hand Bentley from a prestigious dealer who state mileage based on speedometer

sued for breach arguing that mileage was a term in the contract

here the seller was in a position to know or find out and ought to have known better than relying solely on the speedometer

representation will be incorporated as a term even where representor is ignorant as to its accuracy if the representor was in a position where he ought to have known the facts he represented

Misrepresentation act 1967 s3

damages may be awarded under section 2 regardless of section 1 but to ensure that they are not overlapping

Walker v Boyle

exemption clauses in standard form contracts are unlikely to apply where the parties have not directed their minds to exclusion clauses

sale of property, misrepresentation that there were no easements/disputes

condition that ‘no misstatement in any preliminary answer concerning the property shall annul the sale

condition was void because it did not satisfy the reasonableness test even though had specifically directed their minds to it

First Tower Trustees v CDS

commercial lease, representation that there was no notification of any environmental issues

subsequently informed of asbestos contamination but did not inform the buyer

included a reliance clause that the agreement had ‘not been entered into in reliance on any representation made by … the landlord’ - this was void for being unreasonable

non-reliance clauses can give rise to contractual estoppel but also subject to reasonableness test under the 1967 act