Law of Contract: Misrepresentation

Misrepresentation

According to the Contracts Act Cap 284, Section 1(a), misrepresentation is a positive assertion not warranted by the information of the person making it, or an assertion that is untrue but believed to be true by the maker.

Representations as to the Future

Statements about the future are generally not misrepresentations unless:

  1. The statement is made fraudulently (knowing it is false or with no intention of fulfilling it).
  2. The statement is made recklessly (without caring whether it is true or false).
  • Case Example: Edgington v. Fitzmaurice (1885) - A company falsely claimed funds would be used for business expansion when the true intention was to pay off debts. This was actionable as misrepresentation because the representor had no intention of fulfilling the promise.

Statements of Law

Statements of law are generally not actionable as misrepresentation because everyone is presumed to know the law.

  • Case Example: Pankhania v. Hackney London Borough Council (2002) - Misstatement about the legal rights of occupants was a misrepresentation because the buyer relied on the seller's legal knowledge.
  • Case Example: Solle v. Butcher (1950) - A landlord misrepresented rent control, which amounted to misrepresentation due to the landlord's superior legal knowledge.

Mere Puffs

Mere puffs are exaggerated or promotional statements not intended to be taken literally and are not treated as misrepresentations.

  • Case Example: Carlill v. Carbolic Smoke Ball Co. (1893) - The company's claim of depositing £1,000 in a bank to show sincerity made the statement actionable, as it was more than a mere puff.
  • Case Example: Dimmock v. Hallett (1866) - Describing land as "fertile and improvable" was considered a sales pitch and not a factual statement, hence not actionable.

Reliance on a Fraudulent Statement

Fraudulent misrepresentation occurs when a false statement is made knowingly, recklessly, or without belief in its truth. Remedies include rescission or damages.

Key Elements:

  1. The statement must be false.
  2. It must have been made with fraudulent intent.
  3. The innocent party must have relied on the statement.

  • Case Example: Derry v. Peek (1889) - A statement is fraudulent if made knowingly, without belief in its truth, or recklessly.

  • Case Example: Redgrave v. Hurd (1881) - The plaintiff was entitled to rely on fraudulent statements without verifying their truth.

  • Contracts Act CAP 284, Section 14 defines fraud to include acts committed with intent to deceive.

  • Section 18 provides that a contract induced by fraud is voidable at the option of the innocent party.

Representation Falsified by Later Events

A representation true when made but later becomes false is generally not actionable unless the representor fails to disclose the change when under a duty to do so.

  • Case Example: With v. O’Flanagan (1936) - Failure to update a statement about the income of a medical practice amounted to misrepresentation when the income dropped significantly before the sale was completed.