EXAM NOTES - Misrepresentation Flashcards
Structure for a misrep question
- parties/basis to claim
- misreps v mere puff
- misreps: actionable/classify/remedy
mere puff case
Dimmock v Hallet
term not representation case
J Evans v Andrea Merzario
what the requirements for a misrep? Who from?
- unambiguous
- false
- statement of fact or law
- addressed to misled party
- material and induces contract
- causes loss
FROM POOLE
explain an unambiguous statement?
- clear McInery v Lloyds
explain how a statement is classed as false
- As long as a statement is substantially correct it is not false for the purposes of misrep Avon v Swire
what is a representation?
statement asserting the given current state of affairs – Kleinwort v Malaysia Mining – statement of current policy was an accurate representation of affairs at the time
can a false statement of law be a misrep?
- yes
- Pankhania v Hackney; saying an occupant held a license not a tenancy was a misrep
can conduct be a misrep?
- yes - misrep of fact especially attempts at concealment
- Spice Girls v Aprilia – taking part in the photo shoot despite knowing one of them was leaving concealed the fact one of them was leaving and was a misrep
what is the rule on giving opinion?
- not a statement of fact Bisset v Wilkinson (farm sale)
- unless the misrepresentor is an expert and their opinion is unreasonable Smith v Land & House
- Esso v Marden – expert opinions are more likely to be statements of fact
what is the rule on representations about the future?
- cannot be true or false at the moment they’re made Beattie v Ebury
- No duty to inform other party of change in future intention Wales v Wadham
- Dishonest statement of intention is fact Edgington v Fitzmaurice
what is the rule on silence?
silence is not fact - no duty to disclose information
Keates v Earl of Cadogan
what are the exceptions to the silence rule
o Continuing misrep – initially true statements that are false at time of contracting With v O’Flanagan
o Contracts of utmost good faith e.g. insurance contracts – duty to disclose all material facts e.g. Locker v Western Australian Insurance
o Fiduciary relationships
o Half truths – statements (i.e. partial disclosures) that are true but misleading Dimmock v Hallet (all the properties were let but every tenant had given in their notice)
how should a misrep be addressed to the party?
- either directly to C
- or indirectly through a third party e.g. Commercial Banking Co of Sydney v Brown – misrep by D’s bank to C’s bank
what is the test for materiality
objective test; would the statement influence the reasonable man in C’s position – Pan Atlantic v Pine Top
how is inducement decided?
o If statement is material then inducement is generally inferred (Smith v Chadwick) unless D can subjectively prove C was not induced Museprime v Adhill eg by showing they were induced by their independent investigation instead
o If statement is not material, lack of inducement generally inferred unless C can prove they were induced Museprime v Adhill
how serious must the inducement be
- Statement needs to be AN inducement (JEB v Mark Bloom) but not necessarily the SOLE inducement (Edgington v Fitzmaurice)
when will inducement not happen?
- No inducement where C did not hear or see the misrep (Horsfall v Thomas)
or did not rely on it Smith v Chadwick
or knew it to be untrue Redgrave v Hurd
What is the general rule about investigation?
- No general duty to check Redgrave v Hurd
- If misrep is fraudulent then investigation by C is ignored (S Pearson v Dublin Corp)
- even partial reliance on misrep is sufficient, even if you have investigated in depth too Edginton v Fitzmaurice
when will investigation be expected?
the more commercial the dealings the more reasonable it is to check Smith v Eric Bush
- No inducement if C relies on his own investigation, especially if done in depth Attwood v Small
what are the categories of misrepresentation
- Fraudulent
- Negligent
- Innocent
define fraudulent misrep
- Derry v Peek; false rep made
o Knowing it was untrue or
o Without belief in truth or
o Reckless as to truth
how can a statement be reckless as to the truth for fraudulent misrep?
“a flagrant disregard for the truth” higher standard than elsewhere Thomas Whitter v TBP
what is the main difficulty with fraudulent misrep?
- Hard to prove – burden on C
o More than just balance of probabilities but less than beyond reasonable doubt
what is the main advantage with fraudulent misrep?
- Once proven motive irrelevant
o Court will ignore investigation S Pearson v Dublin Corp
what remedies are available for fraudulent misrep
- Rescission (as of right)
- Extensive damages
- Indemnity if relevant
- no damages in lieu of rescision
what damages are available for fraudulent misrep
- All loss “directly flowing” from the transaction – Doyle v Olby
- Damages for loss of profit (East v Maurer)
how is loss “directly flowing” decided for fraudulent misrep
o No need for foreseeability
o Only limit – must not be rendered too remote by C’s decisions
o C must mitigate as soon as fraud discovered Smith New Court v Scrimgeour
o Damages will be reduced by any benefit accruing to C as a result of the misrep Smith New Court v Scrimgeour
what is the rule on loss of profit for fraudulent misrep?
o Loss of profit can be recovered East v Maurer
But if you have made any profit at al you are not entitled to claim for loss of profits Downs v Chappel
• Unless you can show a particular amount you have lost out on Clef Aquitaine v Laporte
how does contrib neg work in relation to fraudulent misrep?
- Contrib neg is no defence Standard Chartered v Pakistan National Shipping
what is rescission? how does it work?
reversing the contract
- Must inform of intention to rescind; contract continues until this point. Can be directly, by court order, or by taking all reasonable steps (Car v Caldwell)
- Courts will do what is “practically just” Erlanger v New Sombrero
what are the bars to rescission?
TAIL o Third party rights – Phillips v Brooks o Affirmation – Long v Lloyd o Impossibility – Clarke v Dickson o Lapse of time – Leaf v International Galleries
what is an indemnity?
- Protects C from obligations accrued by C as a result of the contract e.g. needed to pay business rates
- generally not awarded if damages are available instead
o Whittington v Seale-Hayne
what governs negligent misrep?
- Misrep Act 1967 s2(1)
how does neg misrep work?
- C must prove D made a false statement
- D must then prove (1) their belief in the statement and (2) that they had reasonable grounds for that belief
- must be a contract between them
- hard for D to prove eg Howard v Ogden – D checked the Lloyd’s register to see how much weight a barge could take rather than the documents
what remedies are available for neg misrep
- Rescission (at court’s discretion) or
- Damages in lieu of rescission s2(2), and
- Damages s2(1) and
- Indemnity (if relevant)
how do damages in lieu of rescission work?
may be awarded with regard to:
- the nature and seriousness of the misrep
- loss that would be caused if contract were upheld
- loss that rescission would cause the other party (UCB Corporate v Thomason)
what is the general rule for neg misrep damages?
“Fiction of fraud”
– same damages as for fraudulent misrep Royscott v Rogerson
- except for negligent, losses flowing from the misrep are included not losses flowing from the transaction (less) – Smith New Court v Scrimgeour
are damages reducible for contrib neg in a negligent misrepresentation?
o Gran Gelato v Richcliffe suggests they could be
o Royscott v Rogerson disagrees
are damages in lieu available in neg misrep if the right of rescission has been lost by the time the contract comes to court?
o Zanzibar v British Aerospace suggests you cannot get s2(2) damages in lieu
o Thomas Witter v TBP suggests you may be able to get s2(2) damages in lieu as long as at some point you had the right of rescission
can liability for neg misrep be excluded?
- Cannot unless it is reasonable to do so under UCTA 1977 – MA 1967 s3
what governs innocent misrep?
- Misrep Act 1967 s2(2)
how does innocent misrep work?
- Burden on misrepresentor to prove he had reasonable grounds to believe he was telling the truth up to the time the contract was made
what remedies are available for innocent misrep
- Rescission or
- Damages in lieu s2(2)
- Indemnity if relevant
- No right to substantive damages
o But rescission or damages in lieu are available relatively easily
What governs attempts to exclude liability for misrepresentation?
s3 MA 1967
- must satisfy requirements of reasonableness s11(1) UCTA 1977
What is a negligent mistatement?
- D owed C a duty of care
- D breached that duty of care through a negligent misstatement
- C relied on that information to his detriment
covered by tort law under Hedley Byrne v Heller
How is mitigation judged
C cannot waste more money than needed
- but mitigation “not weighed on nice scales”
- Banco de Portugal v Waterlow
give an example of a misrep by conduct
(Spice Girls v Aprilia)
Gordon v Selico
