Contract - Misrepresentation Cases

Question 1

McInerny v Lloyd’s Bank Ltd

Answer 1

Definition of misrepresentation

“An unambiguous false statement of fact made by one contracting party to another before the contract was made and which was one of the factors that induced the other party to enter into the contract”.

Question 2

Bisset v Wilkinson

Answer 2

Farm + sheep

Statement must be one of fact, not opinion (unless C can show that the opinion was not held)

If person making the statement doesn’t have the knowledge to know, likely to be opinion not fact.

Question 3

Smith v Land and House Property Corporation)

Answer 3

Tenant in arrears - “most desireable”

Statement must be one of fact unless there are no reasonable grounds for maker to believe it is true.

Question 4

Edgington v Fitzmaurice

Answer 4

Company borrowed money to expand - really to cover debts.

Statement of intention will only be misrepresentation when intention was never really held.

Misrepresentation must be at least one of the reasons for C entering contract.

Question 5

Keats v Earl of Cadogan

Answer 5

Silence does not constitute a misrepresentation.

Question 6

With v O’Flanagan

Answer 6

Exception to Keats (Silence is not misrep):

Failing to disclose a change in circumstances that would render a previously true statement false.

Question 7

Dimmock v Hallet

Answer 7

Exception to Keats (Silence is not misrep):

Telling of a half-truth.

Also - “mere puff”

Question 8

JEB Fasteners v Bloom

Answer 8

Misrepresentation must be material re. C entering contract.

Question 9

Pan atlantic Co. Ltd v Pine Top Insurance Ltd

Answer 9

Objective test for misrepresentation materiality:

“The test was whether the information would have influenced the reasonable insurer to decline the risk or to have stipulated for a higher premium”.

Question 10

Attwood v Small

Answer 10

There must be reliance on the statement / representation.

Question 11

Redgrave v Hurd

Answer 11

C may claim misrepresentation despite failing to verify truth of a representation

(subject to exceptions e.g. C is experienced in the area)

Question 12

Peekay v Australia and New Zealand Banking Group Ltd

Answer 12

Exception to Redgrave v Hurd:

Misrepresentation may not be found where written contract contains terms differing from those orally communicated.

Question 13

Derry v Peek

Answer 13

Fraudulent misrep occurs when false representation is made:

• knowingly, or
• without belief in its truth, or
• recklessly, “careless whether it be true or false”

Question 14

Car and Universal Finance Co. Ltd

Answer 14

In the event of rescission, the innocent party must notify the other of the intention to rescind (a reasonable attempt may suffice).

Question 15

Long v Lloyd

Answer 15

Bar to rescission:

Where the innocent party affirms the contract.

Question 16

Leaf v International Galleries

Answer 16

Bar to rescission:

Where there has been an undue delay between the point at which the misrep. should have been discovered and the point at which it was actually discovered.

Question 17

Crystal Palace FC v Dowie

Answer 17

Bar to rescission:

Where it is impossible substantially to restore goods / property to the other.

Question 18

Erlanger v New Sombrero Phosphate

Answer 18

In rescission, restoration need not be exact.

Question 19

Whittington v Seale-Hayne

Answer 19

On rescission, innocent party may claim an indemnity for expenses incurred from contract (claims restricted and only cover the precise terms of the contract).

Question 20

Doyle v Olby (Ironmongers) Ltd

Answer 20

Remedies - damages - fraudulent misrep.

If fraudulent misrep - sue in tort of deceit - all direct damages, usual foreseeability rules don’t apply.

Question 21

Royscot Trust v Rogerson

Answer 21

Remedies - damages - non-fraudulent misrep.

Damages assessed in the same way as fraudulent (i.e.remoteness doesn’t apply).

Question 22

Smith New Court v Scrigemour Vickers

Answer 22

Remedies - damages - non-fraudulent misrep.

Damages includes losses flowing from misrep, not transaction.

Question 23

Howard Marine v Ogden

Answer 23

Potential defence for non-fraudulent misrep.

D must prove that he had reasonable grounds to believe, and honestly did believe up to the time the contract was made, the facts were true.

Difficult to prove as contains both subjective and objective elements.

Question 24

Smith v Chadwick

Answer 24

If the statement is material, inducement is inferred.

Question 25

Phillips v Brooks

Answer 25

Barriers to rescission - 3rd party purchaser