Damages following a misrepresentation - Flashcards
Damages for misrepresentation can be claimed following
Under common law rules.
What is fraudulent misrepresentation?
This is not used often because it is very difficult to prove and can be an expensive action.
In Derry v Peek (1889) Lord Herschell said:
“Fraud is proved when it is shown that a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false.”
What is the measure of damages?
If the representeee can prove fraud, then in addition to recession (unless barred) s/he can also claim damage under the tort of deceit. The measure is the usual tortious measure of reliance loss (out of pocket loss) rather than expectation loss. Damages for fraud are generally assessed on a more generous basis compared with other torts
what does the case of Doyle v Olby state?
The case of Doyle v Olby [1969] 2 QB 158; and Smith New Court Securities v Citibank (1996) show that the remoteness test for fraudulent misrepresentation is a generous one. The innocent party can claim for all loss from relying on the false statement regardless of foreseeability.
What about East v Maurer 1991?
when a business was bought as a result of a fraudulent misrepresentation, the innocent party was not awarded the profit that would have been made had the statement been true. Instead, the innocent party was entitled to the profit that would have been made from an alternative business in a similar area. This is because had the statement not been made, the buyer would have bought an alternative business.
What is Negligent Misrepresentation at common law?
Established in the case of Hedley Byrne v Heller; It was held that damages could be awarded for a negligent mis-statement based on the tort of negligence but the liability was excluded by the disclaimer used by Heller.
What is held in the negligent Misrepresentation under the Misrepresentation Act 1967?
The 1967 Act introduced its own version of negligent misrepresentation in s.2(1). This subsection addresses three key issues:
• It defines negligent misrepresentation as a false statement made with no reasonable grounds for believing it to be true.
• It reverses the burden of proof by stating that it is for the maker of the statement to prove it was not negligent.
• On the measure of damages it says that the maker of the statement is liable as if he was fraudulent.
What was held in the case of Hooley 1991?
the effect of the Court of Appeal decision is to treat a foolish but honest man as if he were dishonest.”
What is Wholly innocent misrepresentation
Originally, this existed at common law but was enacted by the 1967 Act section 2 (2). There are two key points to observe from this:
• It defines wholly innocent misrepresentation as a false statement made with reasonable grounds for believing it to be true.
• It says that the courts have discretion to award damages in lieu of rescission (instead of rescission).
What is the measure of damages
There is an obiter comment from William Sindell v Cambridge CC [1994] 3 All ER 932 which suggests that an award under section 2(2) is the difference in value between what the innocent party was misled into believing s/he was acquiring and the actual value of what was acquired calculated at the time the contract was entered. This is a contract based award rather than one from tort. In effect, the damages are making up for the bad bargain.
When can damages be awarded?
Until recently this was not entirely clear. It is obvious from the wording of s.2(2) that it is not possible to claim damages and have rescission since it allows for damages in instead of rescission. But this can have two meanings:
• Does it mean that a court can award damages when the right to rescind the contract has been lost, perhaps because a bar to rescission applies? This would make sense because it means that a remedy is provided to the innocent party.
• Alternatively, are damages only available if the right to rescind exists so that the court is swapping one remedy for the other? This would mean that the court would have no power to award damages where the right to rescind has been lost.
What is held for Exemption clauses and misrepresentation
It is not uncommon for a party to include a contractual term excluding liability for misrepresentations. This is covered by s.8 UCTA 1977 which makes such clauses subject to the test of reasonableness. The assessment is to be made by looking at reasonableness at the time the contract was made. However, a party cannot exempt liability for its own fraudulent statements (Pearson v Dublin Corporation [1907] AC 351). But it is possible for party to exclude the liability for fraudulent statements by their agents (HIH Casualty & General Insurance v Chase Manhattan Bank [2003] UKHL 6).
What about Misrepresentation and consumer contracts?
The rights applicable to consumers are from the Consumer Protection from Unfair Trading Regulations 2008 (the 2008 Regulations). The 2008 Regulations impose obligations on traders. However, the 2008 Regulations were amended by the Consumer Protection (Amendment) Regulations 2014. The amendment extended the 2008 Regulations to allow for private enforcement by consumers.
The 2008 Regulations do not apply specifically to misrepresentations. Instead, liability is for unfair commercial practices. A ‘commercial practice’ is defined in Regulation 2 as:
… any act, omission, course of conduct, representation or commercial communication (including advertising and marketing) by a trader, which is directly connected with the promotion, sale or supply of a product to or from consumers, whether occurring before, during or after a commercial transaction (if any) in relation to a product.
- - -‘Unfair practices’ are not confined to pre-contractual practices. Instead, it also covers practices taking place at the time the contract as well as those after the contract is made. - - -
