Actionable Misrepresentation

Question 1

What is an actionable misrepresentation?

Answer 1

A misrepresentation with the potential to affect the fairness of the process by which a contract was entered into.

Question 2

What is the consequence of a finding of an actionable misrepresentation?

Answer 2

A contract entered into as a result of an actionable misrepresentation is voidable - liable to being set aside and the parties restored to their pre-contractual position.

Question 3

What is the difference between a representation and a term? (2)

Answer 3

When distinguishing the two, consider;

1. Pre-contractual statements that are not referred to in written contracts are generally not intended to be binding promises
2. Statements suggesting the other party should check the accuracy of given statements indicate the statements are more likely to be representations - Ecay v Godfrey
3. A statement made by a non-expert about his own product is more likely to be a representation - Dick Bentley Productions Ltd v Harold Smith Ltd

Question 4

What are the five basic requirements to establish an actionable misrepresentation?

Answer 4

1. There must be a statement (words and/or conduct)
2. The statement must be of existing fact or law
3. The statement must be false and unambiguous
4. The statement must be made by a representor who becomes a party of the contract
5. The party must have relied on the statement and it must have induced the contract

Question 5

What is the authority for the requirement that an actionable misrepresentation must be a statement? (3)

Answer 5

LJ Denning in Curtis v Chemical Cleaning & Dyeing Co said; ‘any behaviour by words or conduct, is sufficient tp be a misrepresentation…’
Authority for words - Sykes v Taylor-Rose
Authority for conduct - Gordon v Selico

Question 6

Can silence constitute an actionable misrepresentation? (1)

Answer 6

No - mere silence is not a misrepresentation

Authority - Fox v Mackreth

Question 7

Is there a duty of disclosure in regards to misrepresentation? (1)

Answer 7

No - generally there is no duty of disclosure
Authority - Turner v Green
There are however 5 exceptions to this position

Question 8

What are the 5 exceptions to the general position that there is no duty of disclosure? (4)

Answer 8

Half-truths - Spice Girls Case
Change of circumstances - Davies v London & Provincial Marine Insurance
Active attempt to conceal a defect - Schneider v Heath
Fiduciary or confidential relationship
Contracts of utmost good faith - Lambert v Co-Operative Insurance Society

Question 9

What is the authority for the requirement that an actionable misrepresentation is a statement of fact or law? (1)

Answer 9

The relevant statement must be one of fact or law, a mere opinion will not suffice
Authority - Bisett v Wilkinson

Question 10

What are the exceptions to the position that the statement must be one of fact or law? (3)

Answer 10

1. Where the statement maker is in a better position to know the truth - Smith v Land and House Property
2. Where the statement is made by an expert - Esso Petroleum Ltd v Mardon
3. Where the statement is not genuinely held - Edginton v Fitzmaurice

Question 11

Where was the test for a false and unambiguous statement developed? (1)

Answer 11

In the case of Avon Insurance Plc v Swiss Fraser Ltd by Rix J

Question 12

What is the test to determine if a statement is false and unambiguous?

Answer 12

(1) Is the statement ‘substantially correct’ so differences between what was represented and the correct position were unlikely to induce the contract?
(2) Consider the matter broadly - overall are the statements broadly correct - don’t focus microscopically

Question 13

How does the requirement that a statement is false and unambiguous link to the requirement of a statement of fact or law?

Answer 13

The link lies in the fact that, in a way, only statements of fact or law can be said to be ‘false’ or ‘true’.

Question 14

What is the authority for the requirement that a statement must be unambiguous? (1)

Answer 14

Authority - McInerny v Lloyds Bank Ltd

Question 15

What is the authority for the position that the statement must be made by a representer who becomes a party of the contract? (1)

Answer 15

The general rule requires the ‘misrepresentation’ to have been made to the eventual party to the contract and not a third party.
Authority - Peek v Gurney

Question 16

What is the exception to the requirement that the statement be made by a representor who becomes a part fo the contract? (1)

Answer 16

Where the representer makes a statement to an eventual third party but with the knowledge that the statement will be passed on to another party (who then enter into the contract) there may still be liability for misrepresentation.
Authority - Pilmore v Hood

Question 17

What are the sub-criteria of the requirement that the statement must induce the contract? (5)

Answer 17

1. The representations must be material - Spice Girls Case
2. It must be known to the representee - Horsfall v Thomas
3. It must be intended to be acted upon - Peek v Gurney
4. It must be acted upon - test of Edginton v Fitzmaurice, no actionable misrepresentation if the representee didn’t actually rely on the misrepresentation - Peekay Case

Question 18

When may a claimant be said not to have relied upon a misrepresentation? (1)

Answer 18

Where a claimant relies entirely upon their own judgement or investigations when entering into a contract they will generally not be said to have been induced into the contract by a misrepresentation.
Authority - Attwood v Small

Question 19

Does a misrepresentation have to be the sole inducing factor for an actionable misrepresentation? (1)

Answer 19

No, partial inducement by a misrepresentation will be sufficient to ground an actionable misrepresentation.
Authority - Edginton v Fitzmaurice

Question 20

What implications may a failure on the part of a representee to take the chance to test the accuracy of statements have on their prospects of an actionable misrepresentation? (1)

Answer 20

It does not prevent the misrepresentation being an active inducement but it may have implications for remedies - damages received for instance - contributory negligence
Authority - Redgrave v Hurd

Question 21

What is the significance of the materiality of the misrepresentation? (2)

Answer 21

The misrepresentation must have been material to the decision to contract and must be seen to be capable of inducing the reasonable man to contract
Authority - Sharland v Sharland
For fraudulent misrepresentation, inducement may be assumed from materiality
Authority - Barton v County Nat West Bank Ltd