Chapter 7: Misrepresentation Flashcards
What is misrepresentation?
Misrepresentation is a vitating factor. These are circumstances that can lead to a contract being held as void or voidable
What is the purpose of misrepresentation?
It concerns the effect of express statements made prior to entering a contract.
These consists of 4 different statements that caused the party to enter into contract, and the actions that can be brought to court
What are the 4 statements made prior that may cause the party to enter into contract. And what are the actions that can be brought against them to court?
- Terms - Some of these statements would end up as part of the contract (Action for breach of contract)
- Representation - Statements made during negotiations/pre-contract statement that entice the other party to enter contract (Action for misrepresentation)
- Mere puff - Sales talk/exaggerated statements (Not actionable)
- Collateral terms (Like an action for breach of warranty)
What are the disctinctions between the statements made prior
Terms
- Remedy lies for Breach of Contract
Repressentation
- Remedies available for Misrepresentation
What is the act that gave more remedies to Misrepresentation
Misrepresentation Act 1967
What was the situation before the Misrepresentation cat 1967
- There were limited remedies for Misrepresentation
- If there was a statement, the person would rather bring the terms, as a course of action
- This would increase their chances to get a remedy as breach of contract had more remedies
What happened after the Misrepresentation Act 1967?
- Everything then changed due to this Act - Today, it doesn’t really matter which problem you bring to court
- Section 2 of MA 1967 - Allows much more extensive remedies in damages for misrepresentation
- Section 1(a) of MA 1967 - Provides that a contract may be rescinded (revoked) for misrepresentation, even if the misrepresentation is also a term of the contract
What is the contractual cartography test? What case laid down the rules?
When judges not sure, there can refer to certain guidelines to help them decide (not mandatory/just guidelines)
Heilbut, Symons & Co v Buckleton (1913) Lord Moulton
- It all depends on the intention (objectively ascertained) of the parties
Whether their words and conduct indicate to a reasonable person that the statement was intended to be mere representation or, alternatively, that it was intended to be a contractual term
What are the 5 guidelines that judges could refer to?
- The importance of the statements to the parties
- The relative degree of knowledge / skill between the parties
- Was the statement reduced in writing
- The time the statement was made
- Accepting responsibility / advising on verification
What are 3 scenarios with cases that put the importance of the statements to the parties
- When buyer puts extreme importance on the statement, and would have not entered into contract if it was untrue (Bannerman v White (1861))
- Where buyer specifically ask the seller to confirm a statement in the catalogue before the sale (Couchman v Hill (1947))
- Where the statement was made not in the same transaction as the sale, this would most likely not be a term (Hopkins v Tanqueray (1854))
What is the principle regarding, the relative degree of knowledge / skill between the parties
- When a person is more skilled and has special knowledge than the other party. If so, then judges are more inclined to infer the statement as a term.
- Contrarily, the degree of knowledge is the same, then it is treated as representation
What are the cases for The relative degree of knowledge / skill between the parties
Oscar Chess v Williams (1957) - Representation
Dick Bentley v Harold Smith Motors Ltd (1965)
Oscar Chess v Williams (1957)
Facts
- C brought a second-hand Morris car on the basis it was the 1948 model
- C asked for the brand new Hillman Minx that was purchased from Oscar Chess
- D stated that it was in fact the 1948 model, and on the basis that Oscar Chess offered £290 off the purchase price
- 8 months later found out that it was a 1939 model, that was worth much less
Held
- The statement relating to the age of the car was not a term, but representation
representation
Dick Bentley v Harold Smith Motors Ltd (1965)
Facts
- Dick Bently knew the D, which was a car trader had a greater knowledge than the C
- C asked D to look out for a well vetted Bentley car
- D told him that the car had been owned by a German Baron, and had been fitted with a replacement engine and gearbox and had only done 20,000 miles since the replacement
- Turns out it did about 100,000 miles since the refit
Held
- It was a term, as Mr Smith had greater expertise and the claimant relied on it
term
What are the principles whether the statement was reduced in writing
Parole evidence rule
- Oral evidence is inadmissible (not valid) and the PCS cannot adduce extrinsic evidence to add to vary or contradict written document
What are the 2 scenarios and cases for whether the statement was reduced in writing?
Statement put in writing, then it is more likely to be terms
- Routledge v McKay (1954) - Representation
Also possible that terms are written & oral. In this case, whatever is written then is terms, whatever is oral is representation
- Birch v Paramount Estates (1956) - Term
What is the principle of ‘The time the statement was made - Any time lag between the making of the statement and the eventual conclusion of the contract’
Intervals between the time the statements made, and the contract entered into must be taken into account - Routledge v McKay (1954)
- Statement that was made at the start/beginning of negotiations (Highly likely representation)
- If it’s during or very close to the negotiation (Then it would be terms) -Seen in Schawel v Reade (1913)
What is the issue of accepting resonsibility/advising on verification. What are 2 cases?
Whether the statement was accompanied by a recommendation that it be verified
- Ecay v Godefroy (1947)
- Shawel v Reade [1913]
Ecay v Godefroy (1947)
Facts
- Plaintiff said motor cruiser was sound
- Allowed the D to go check the boat by himself
Takeaway
- In this case, he made no responsibility, thus it was misrepresentation
Shawel v Reade [1913]
Facts
- C wanted to buy a stud (high-class horse)
- D told C that if there were any problems with the horse then he would tell the C (he put trust on him)
- Horse was totally unfit for stud purposes
Takeaway
- Statements spoken can be misrepresentation
How is should Misrepresentation structured?
Actionable misrepresentation
- Unambiguous false statements of fact or law
- Addressed to the other party
- Induced him to enter into the contract
Types of misrepresentation
- Fraudulent misrepresentation
- Negligent misrepresentation at common law
- Negligent misrepresentation under Section 2 of the Misrepresentation Act 1967
- Innocent Misrepresentation
Remedies (determined by the type of misrepresentation)
- Damages
- Recission
What is an actionable misrepresentation?
Must be an unambiguous false statement of existing fact or law which was addressed to the other party which induces him to enter into the contract
What are the 4 elements of actionable misrepresentation
- It must be unambiguous
- Representation must be made false
- There must be a statement made
- Facts or law
What is meant by ‘statement must be unambiguous’? What is the case that supports this rule?
A degree of certainty is required, statement has to be clear
- Dimmock v Hallett [1886]
- Where the land was described as ‘improvable’
What is meant by ‘representation must be made false’
- Total truths
- Half truths (Dimmock v Hallett)
- Change in circumstances (With v O’Flanagan (1936); Spice Girls Ltd v Aprilia World Service BV [2000]; Shankland & Co. v Robinson & Co – Lord Dunedin)
What is meant by ‘there must be a statement made’?
General rule
- There’s no duty to disclose facts based on the principle of caveat emptor (let the buyer be aware). But if they do start saying something, then it has to be the truth; either by conduct or silence (Keates v Earl of Cadogan)
Exceptions
- In certain circumstances silence can amount to a ‘statement’
What are the 3 exceptions with cases that silence can amount to a statement
- Silence or inaction in the face of the changed circumstances (With v O’Flanagan; Spice Girls Ltd v Aprilia World Service BV [2000])
- When the whole truth is not disclosed (half truth) (Dimmock v Hallet (1886))
- Contracts of good faith (uberrimae fidei). Parties are obliged to disclose relevant information, even if it is not asked for (Lambert v Co-operative Insurance Society Ltd [1975])
What is meant by ‘facts or law’?
Facts are verifiable (is consequential)
Whereas opinions are not a misrepresentation (generally)
What is the general rule for representation of opinions? What is the case that supports the GR?
Statements of opinions are not misrepresentation (lay person is entitled to their own opinion)
Bisset v Wilkinson [1927]
- Facts - Gave an opinion that the land could hold a certain amount of ships
- Held - Courts said it was a mere opinion as a general rule
- Takeaway - The businessman or seller does not mean he is immediately the expert
What are the 2 exceptions circumstances to the GR with representing opinions
- If someone has an expertise, skill or knowledge (i.e.professional) - then can sue for wrong opinion
- Person expressing the opinion is aware of facts which indicate that the opinion cannot be sustained
What is the case for the exeption of a person with expertise, skill or knowledge when giving opinions?
Esso Petroleum Co Ltd v Mardon [1976]
- Misrepresentation. The sales representative that worked for 40 years gave an opinion that sales will not be affected, which was not the case (he was expected to be accurate on his opinions)
What is the case for expressing opinion although aware of the facts?
Smith v Land House Corporation [1884]
- Tenant gave the opinion that he was the ‘most desirable tenant’, but the tenant was actually a bad tenant (didn’t pay on time)
- Regarded as misrepresentation
What are the 2 sub-groups under/for being aware of facts? What are the cases for each subgroup?
Statement of intention
Duty to act in good faith
What is the case for statement of intention?
Edgington v Fitzmaurice [1885]
- Was a misrepresentation as the opinion was a lie
- The speaker represents the facts as if she believed to be true, but in fact no such belief is held
What is the general rule for a duty to cat in good faith? And what are the exceptions?
What are the cases for each?
General Rule
- Recent cases considered the desirability of a more general duty upon contractors to act in good faith extending beyond the negotiation of a contract
Case for GR
- YamSeng Pte Ltd v International Trade Corp Ltd [2013] HC
- Novus Aviation Ltd v Alubaf Arab International Bank BSC [2016] HC
Case for exceptions
- Monde Petroleum SA v Westernzagros Ltd [2016] EWHC - Did not need to act in good faith
- Re Compound PhotonicsGroup Ltd [2022] EWCA - Where it was suggested that even an express obligation to act in good faith would be interpreted narrowly
What is meant by ‘addressed to the other party’. What are the 2 scenarios that can is valid as being addressed?
Statement must be addressed to the party that is being misled
Can be either
1. Direct Communication of the representation to the Representee
2. Representation addressed to a Third Party with the intention that it be passed to the Representee (Commercial Banking Co. of Sydney v RH Brown & Co)
What are the 6 factors in which the statement induced the party to enter into contract
- Representee must have relied on the statement
- Statement must be one of the factors which led/induced the party to enter into the contract
- Doesn’t have to be the sole/main reason to enter into the contract
- Not sufficient, that ‘he was supported or encouraged in reaching his decision by the representation in question’
- Representation must play a real and substantial role for the claimant’s decision to enter
- Misrepresentation must be a ‘material’ one, where a reasonable person would have relied
What are the 4 circumstance where there is no inducement to enter into contract?
No inducement/reliance of misrepresentation if
- representee was aware of the untruth of the statement, it has to be clearly proven that representee knew so can’t sue/take action
- The representee would have entered the contract even if aware of the untruth
- The representee relied upon some other inducement/made his own inquiries
- The ‘representee’ was not aware of the misrepresentation
What is the general rule for no inducemenet if representee was aware of the untruth? What is the case that supports the GR?
General Rule
- if they didn’t take the chance/opportunity to verify, they would still be able to sue
Redgrave v Hurd [1881]
Facts
- Representor gave statements in writing
- But claimant didn’t check it at the time (failed to take opportunity to verify)
Held
- Failure to take the opportunity, did not prevent himfrom bringing a claim for misrepresentation later on
Takeaway
- Representor has a duty to tell the truth when they make representations once spoken
- It is not expected of the representee to verify the written statements given afterwards
What are the 2 exceptional cases for representee being aware of the untruth?
Smith v Eric S Bush [1990] HL
- Held - Obiter suggested that in certain situations may be unreasonable for representee to not check/verify (situations of commercial or high value transactions)
Hayward v Zurich Insurance Co plc [2016] SC
- Facts - Insurance company’s suspicion that the victim of a workplace was greatly exaggerating his injury fell short of an actual awareness on their part that his claims were untrue
- Held - When evidence of the victim’s fraud was obtained the insurance company was able to rescind the settlement agreement they had entered with him
What is the case for representee would have entered the contract even if aware of the untruth (even if he is in possession of the whole truth)
JEB Fasteners v Bloom
What is the case for The representee relied upon some other inducement/made his own inquiries?
Attwood v Small [1838]
Held
- The misrepresentations did not induce him into entering contract
What is the case for The ‘representee’ was not aware of the misrepresentation
Horsfall v Thomas [1862]
Facts
- Representee wanted to buy a gun
- There was a defect in the gun
- Representor put a metal plug to conceal the gun’s barrel (was a misrepresentation by conduct)
- However, the representee didn’t check whether
Held
- Since the representee did not even check the gun, he couldn’t even be induced/influence into entering into contract
What are the 4 catergories/types of misrepresentation?
- Fraudulent
- Negligence under common law
- Statutory misrepresentation under Misrepresentation Act 1967
- Innocent
What is fradulent misrepresentation? What case mentions the 3 elements?
Tort of deceit - a deliberate intention to deceive the representee
3 elements/propositions - (Derry v Peek [1889] HL Lord Herschell)
- Knowingly or;
- Without belief in its truth or;
- Recklessly/carelessly whether it is true or not - without regard to its truth
What is the general rule and the case for fraudulent misrepresentation?
If fraud is proven, motif of the guilty person is immaterial
Polhill v Walter
- the representor knew that the statement was false but made it for the benefit of his principle and to benefit himself
What is the bruden of proof for fradulent misrepresentation?
Claimant/representee bares the burden to prove fraud
- Fraud is a serious allegation and it is difficult to prove
- Cannot simply allege unless there is good grounds for it
What is negliegence under common law? What is the case that lays down the scope?
What are the 3 elements that must be established by the claimant to prove negligent misrepresentation?
Hedley Byrne v Heller (1964) HL
- The maker of the statement and the person relying on it are in a ‘Special Relationship’ giving rise to a duty of care under the principles of and the maker of the statement acts in breach of this duty
Claimant must estbalish
- A defendant owed them a duty of care
- There was sufficient proximity between them and the defendant (there was a ‘special relationship’ between them)
- The defendant breached their duty of care and did not exercise reasonable care and skill
What are the 3 principle factors for negligent misrepresentation?
- Knowledge of the representor
- Purpose for which the statement was made
- Must be reasonable for the representee to rely on the representor’s statement
What is the section and Act for statory misrepresentation? What does the section state?
Section 2(1) of the Misrepresentation act 1967 -
Where a person has entered into a contract after a misrepresentation has been made to him by another party thereto and as a result thereof he has suffered loss, then, if the person making the misrepresentation would be liable to damages in respect thereof had the misrepresentation been made fraudulently, that person shall be so liable notwithstanding that the misrepresentation was not made fraudulently, unless he proves that he had reasonable ground to believe and did believe up to the time the contract was made the facts represented were true
What must the representor prove under section 2(1) to not be liable for statutory misrepresentation
When misrepresentation is made from one party to another which induced him to enter contract (actionable misrepresentation), the party making the misrepresentation is liable to the other in damages unless he can prove
- He had reasonable grounds to believe to make the representation
- Did believe up to the point that the contract was made that his statement was true
Who bares the burden of proof to prove statutory misrepresentation section 2(1)
Burden of Proof
Representor (defendant)
- Shifts to the **representor **to prove that he had the 2 components/elements to disprove his actions (difficult to prove/heavy burden)
Representee (claimant)
- Claimant - Prove that misrepresentation was made and that it induced the contract (actionable misrepresentation)
What is the case for Statutory misrepresentation under seciton 2(1) Misrepresentation Act 1967
Howard Marine and Dredging Co v Ogden and Sons (1978)
Facts
- Defendant (representee) wanted to know the true weight of the ship
- Claimant (manager) said that the deadweight was for each capacity was 1600 tons. Was actually 1055 tons
- D used the barges for 6 months and discovered the actual weight
- Refused to continue to pay hire charges
Held
- Favoured the defendant that there was misrepresentation
- Should have checked the ships document
IMPORTANT
What is innocent misrepresentation?
Where maker of the statement genuinely believes it is true and does not act negligently (at common law or under statute, as above) in making it then the action only lies for innocent misrepresentation
What are the 2 remedies for misrepresentation?
Damages
Recession
How does damages apply for misrepresentation?
How much damages representee gets back, is determined by the type of misrepresentation
What are the damages for Fraudulent Misrepresentation?
Damages come from the Tort of Deceit
- Compensation would put the claimant back into original position, where misrepresentation had not been made
- On the basis of Reliance Loss (not Expectation Loss)
What is the amount claimable for damages for fraudulent misrepresentation?
Amount
- All losses/damages which are directly attributable to the deceit are recoverable (whether or not D foresaw the loss)
- Normal rules of ‘remoteness’ does not apply (e.g. D didn’t foresee such loss possible)
What are the 2 cases for ‘remoteness’ not applying for fraudulent misrepresentation?
Doyle v Olby (Ironmongers) Ltd [1969]
Smith New Court Securities Ltd
Scrimgeour Vickers Ltd
What are 2 important aspects to note about fraudulent misrerpesentation?
- Contributory Negligence does not apply
- Exemplary/ punitive/aggravated damages can be awarded
What is the general principle for damages for fraudulent misrepresentation?
What was the case that was the exception for this?
Claimant can’t claim the loss of profits (expected profits/expectation loss)
Exception
- East v Maurer [1991]
What are the damages for negligent misrepresentation under common law?
Aim
- To put claimant at original position (Reliance Loss)
Amount
- Liable for all losses which were reasonably foreseeable consequences of the misrepresentation
- Rule of ‘remoteness’ (The Wagon Mound (No.1))
Note
- If the representee contributed or was at fault of the loss, damages can be reduced - Contributory Negligence (Gran Gelato Ltd v Richcliff (1992))
- Highly unlikely, court may award exemplary/punitive damages
What are the damages for Negligent Misrepresentation under Section 2(1) Misrepresentation Act 1967?
What is the case, and what does it state about negligent misrepresentation under section 2(1)
Royscott Trust Ltd Rogerson [1991] CA
- Courts would treat the damages as if the misrepresentation was made fraudulently (controversial conclusion)
Amount
- All losses are recoverable (calculated as per fraud)
Note
- Reasonably foreseeable principle does not apply
Can contributory negligence, for negligent misrepresentation under Section 2(1) be claimed for damages?
What are the 2 cases regarding contributory negligence?
Cannot claim contributory negligence (as already calculated as fraud)
- As it would would cause a problem, as fraud does not take into account contributory negligence
- (Standard Chartered Bank v Pakistan National Shipping (No 2) (2003))
Gran Gelato v Richcliff (Group Ltd [1992]
- Suggested that damages under section 2(1) might be reduced to include contributory negligence
- Held that they couldn’t do so
What are the damages for innocent misrepresentation traditionally (common law)?
Traditionally - common law
- Damages not available
- Only rescission available
- Courts more lenient, they said representation is a term, and thus a breach or the representation is a collateral contract
What are the damages now for innocent misrepresentation after Section 2(2) Misrepresentation Act 1967?
NOTE: THIS IS SECTION 2(2)
Courts have discretion to award damages in lieu (instead) of rescission
- Must choose 1 (can’t choose both)
- Discretionary (not as of right)
* Courts have discretion to do what is equitable
* Must consider the nature of the misrepresentation in relation to the matter and loss that would be caused to parties if the contract was upheld or rescinded
* Depends on facts of the case
Note
- **William Sindall plc v Cambridgeshire CC, Lord Hoffman **- Held that D can’t choose to rescind, only could recover as damages
Can claimant claim for damages after the right to rescind has lapsed its time for innocent misrepresentation?
What are the cases that support your answer?
Yes, claimant does not lose the right to claim damages (so long as he had the right to rescind in the past)
- Thomas Witter Ltd v TBP Industries
No, claimant lost the right to rescind, loses rights to damages as well
- Govt of Zanzibar v British Aerospace (Lancester House) Ltd
What is recission?
Recissio is available for all types of misrepresentation.
- Once obtaining recession, validity is set aside, which puts both parties at their original position as per before the contract existed
- Any goods or money exchanged must be returned to parties
What is the nature of recission?
- Renders a contract ‘voidable’ (rather than void)
- Meaning that contract is valid until it is set/put aside at the option of representee (by obtaining rescission)
voidable = valid contract until obtained recission (recission)
void = contract never existed (doctrine of mistake)
What is the obligatory process of obtaining recission?
Recission must be sought by the claimant
- Does not occur automatically
- Claimant must elect or affirm to rescind the contract
Recession must be given notice to the other party
What are the 4 limitations/bars to recission?
Affirmation
- Claimant is aware that can rescind, but chooses to continue the contract (‘affirming’ it)
Lapse of time
- Significant lapse of time between the making of the contract and the discovery of the misrepresentation (unless its fraud)
Restitution is impossible
- Where the good is unable to go back to original value/state (e.g. using a car, value has already gone down)
Third party rights
3rd party rights - refer to mistake
What is the case for affirmation?
A bar to recission
Claimant is aware that can rescind, but chooses to continue the contract (‘affirming’ it)
- Long v Lloyd [1938]
What are the cases for lapse of time?
A bar to recission
Significant lapse of time between the making of the contract and the discovery of the misrepresentation (unless its fraud)
- Leaf v International [1950]
Fraudulent case
- Salt v Stratstone Specialist Ltd (2015) CA
