(BLUE) Misrepresentation

Question 1

What is a vitiating factor?

Answer 1

Something that makes a contract void or voidable- it affects the validity of a contract.

Question 2

What is a voidable contract?

Answer 2

The contract is valid but the innocent party can declare the contract invalid and not legally binding. Misrepresentation is an example of this.

Question 3

What is misrepresentation?

Answer 3

A false statement of fact made by a party in the contract that induces the other party to enter the contract.

Question 4

What are the key elements of misrepresentation?

Answer 4

-Makes a false/untrue statement
-Statement is of fact
-Made by a party to the contract to the other party
-The statement induced the other party to enter into the contract

Question 5

What is a false or misleading statement?

Answer 5

Spice Girls v Aprilia World Service- making a statement should be interpreted broadly to include written and verbal statements, pictures, advertising, packaging and even conduct.

Question 6

What is the general rule for silence or non disclosure?

Answer 6

Fletcher v Krell- usually, silence or non disclosure is not a false statement.

Question 7

What are the exceptions to the general rule for silence or non disclosure?

Answer 7

-Where the contract involves utmost good faith
-Making a half true statement
-Circumstances changing after a statement was made
-Consumer rights

Question 8

What sort of cases does utmost good faith usually apply to?

Answer 8

Insurance cases.

Question 9

What is the rule about silence or non disclosure for contracts of utmost good faith?

Answer 9

Lambert v Co-op Insurance Society- non disclosure of information in cases with very high levels of honesty with each other (insurance cases) will be a misrepresentation.

Question 10

What is the rule about silence or non disclosure for making a half true statement?

Answer 10

Dimmock v Hallett- making statements that are technically true but fail to reveal the full situation can be misrepresentations.

Question 11

What is the rule about silence or non disclosure for circumstances changing after a statement was made?

Answer 11

With v O’Flanaghan- there is a legal obligation to tell the buyer of the change in circumstances if the new situation makes the previous statement false.

Question 12

What is the rule about silence or non disclosure for consumer rights?

Answer 12

If a business leaves out or hides any important information that helps a consumer make an informed choice, this can be a misrepresentation.

Question 13

In which situations will the statement not be of fact?

Answer 13

-Statements of opinion
-Statements of future intention or conduct
-Puff or mere sales talk

Question 14

What is the general rule for statements of opinion?

Answer 14

Bisset v Wilkinson- statements of opinion will not amount to statements of fact and therefore they are not actionable.

Question 15

When can statements of opinion be a misrepresentation?

Answer 15

Smith v Land and House Property Corp- if the opinion is given by a person with special knowledge or skill, this can amount to a misrepresentation.

Question 16

What is the general rule for statements of future intention or conduct?

Answer 16

A statement that expresses future intention is speculation rather than fact.

Question 17

When can statements of future intention or conduct be a misrepresentation?

Answer 17

Edgington v Fitzmaurice- if the person making the statement definitely did not have that intention at the time, this can amount to a statement of fact.

Question 18

What is puff or mere sales talk?

Answer 18

These are empty boats rather than factual statements. The test is whether the statement would make a reasonable person enter a contract.

Question 19

In which case was the statement mere sales talk?

Answer 19

Dimmock v Hallett- the statement was too vague to make a reasonable man enter a contract.

Question 20

In which case was the statement more than mere sales talk?

Answer 20

Carlill v Carbolic Smoke Ball Co- D had made it quite clear they were serious about the rewards, making this more than just sales talk as they would make a reasonable person think the statement was believable.

Question 21

What does it mean that the false statement must be made by a party to the contract?

Answer 21

If the statement is made by a third party to the contract, this will not be a misrepresentation e.g. a misleading Amazon review.

Question 22

What does it mean that the statement must induce the other party to enter into the contract?

Answer 22

The claimant must have relied upon the statement when deciding the enter into the contract. It must have been a critical part of their decision to do this.

Question 23

What factors are considered to see if the statement induced the other party to enter into the contract?

Answer 23

-The claimant must have known about the existence of the false statement
-The false statement must have materially affected the claimant’s decision to enter into the contract

Question 24

In which case did the claimant not know of the existence of the false statement?

Answer 24

Horsfall v Thomas

Question 25

What happens if the buyer did not rely on the false statement?

Answer 25

Attwood v Small- the buyer didn’t rely on the statement, instead they relied on the surveyor’s confirmation so the statement didn’t induce him to enter the contract.

Question 26

What happens if the buyer did rely on the false statement?

Answer 26

Redgrave v Hurd- even if a reasonable person would double check the information, as long as the buyer did actually rely on the statement, this can be misrepresentation.

Question 27

What are the different types of misrepresentation and why is it important to know the type?

Answer 27

-Innocent misrepresentation
-Negligent misrepresentation
-Fraudulent misrepresentation
The remedies are slightly different for the 3 types.

Question 28

What is an innocent misrepresentation?

Answer 28

s2(1) Misrepresentation Act 1967- a statement that is false, but which the representor believed to be true and had reasonable grounds to believe the statement to be true. e.g. Leaf v International Galleries.

Question 29

What is a negligent misrepresentation?

Answer 29

s2(1) Misrepresentation Act 1967- this is where the representor believes their statement to be true but does not have reasonable grounds for believing this. e.g. Howard Marine v Ogden

Question 30

What is a fraudulent misrepresentation?

Answer 30

Where the representor makes a statement they do not believe is true. e.g. there could not be fraudulent misrepresentation in Derry v Peek as the company genuinely believed what they were saying.

Question 31

What are the main remedies for misrepresentation?

Answer 31

-Rescission
-Damages

Question 32

What is rescission?

Answer 32

It applies to all 3 types of misrepresentation and is where the court will allow a party to cancel the contract and put the parties back into the position they were before the contract was made. It is an equitable remedy so the court will only award it when it appears fair to do so.

Question 33

What are the bars to rescission?

Answer 33

-It is impossible to put the parties back into their pre-contractual position
-Delay
-Affirmation of the contract
-Third party has gained rights over the property

Question 34

In which case was it impossible to put the parties back into their pre-contractual position?

Answer 34

Vigers v Pike

Question 35

How does the bar of delay work?

Answer 35

If the claimant leaves it too long before trying to rescind the contract, the court may not allow him to do so. In Leaf v International Galleries, it was too late to rescind the contract after 5 years.

Question 36

How is the bar of delay different between the different types of misrepresentation?

Answer 36

Delay starts from the time of the statement for innocent and negligent misrepresentation, but from the time the misrepresentation is discovered for fraud.

Question 37

What does affirmation of the contract mean?

Answer 37

This is where the misled party decides to carry on with the contract even though they are aware of the misrepresentation. The courts will not allow rescission here as the representee has accepted the situation. Long v Lloyd

Question 38

What does it mean if a third party has gained rights over the property?

Answer 38

If a third party has, in good faith, gained an interest in the goods, then it would be unfair to rescind the original contract because the innocent third party would lose out. Lewis v Avery.

Question 39

When can damages be awarded for innocent misrepresentation?

Answer 39

There is no automatic right to damages for an innocent misrepresentation but s2(2) Misrepresentation Act 1967 says that a court can award damages instead of rescission for innocent misrepresentation if they believe this would be fairer.

Question 40

Which case shows how damages for innocent misrepresentation work?

Answer 40

Govt of Zanzibar v British Aerospace- if a party was barred from the remedy of rescission, the claimant couldn’t claim damages as these were a substitute for rescission. If the claimant was not entitled to claim rescission, he was not entitled to claim damages.

Question 41

What damages can be awarded for innocent misrepresentation?

Answer 41

They cover current losses up to trial.

Question 42

When can damages be awarded for negligent misrepresentation?

Answer 42

Salt v Strastone- the claimant is entitled to claim damages as a substitute to rescission.

Question 43

What damages can be awarded for negligent misrepresentation?

Answer 43

If rescission is available, s2(1) Misrepresentation Act 1967 shows damages are the same as fraudulent misrepresentation, confirmed by Royscot v Rogerson.

Question 44

When can damages be awarded for fraudulent misrepresentation?

Answer 44

Always, even if rescission is barred and this can also be in addition to rescission.

Question 45

What damages can C get for fraudulent misrepresentation?

Answer 45

-All expenses directly arising from the misrepresentation, even if they were not reasonably foreseeable (Doyle v Olby)
-Loss of profit (East v Maurer)