false preliminary statements made by a contracting party Flashcards
what can different types of statements in contractual negotiations be classified as?
a mere puff- obviously exaggerated- no right of action
an express term- part of contract- if untrue, innocent party will gave a remedy for breach
a representation- statement made by one party which may have induced the other to enter into it but doesn’t actually form part of the contract
what does the specimen standard condition of sale say about excluding liability?
sellers sale representatives are not authorised to introduce any other terms into the contract or make any representation
what is the primary test for whether a statement is a term or a representation?
common intention of the parties when they entered the contract i.e. did they intend it to be a contractual term?
what must the court consider when determining whether a statement is a term or representation?
whether one party had greater skill/knowledge
whether the statement made verbally was repeated in a written contract before it was agreed
whether the recipient of the statement made clear it was of vital importance
whether the statement maker invited the other party to verify it
whether there was a lapse of time between the statement.being made and the contract being formed
expand on relative skill and knowledge of the parties
of an expert makes a false preliminary statement to a non-expert, the statement may be considered a term but if this was the other way around (NE to E) it may be a representation
expand on whether the statement made verbally was repeated in a written contract before agreement
this would be evidence that the statement was intended to be a tern but this is not conclusive e.g. Birch v Paramount even though the promise not written in contract it was still enforced in court (so the contract was party written and partly oral)
expand on whether the recipient of the statement made clear it was of vital importance
will be deemed a term- Bannerman v White
expand on whether the statement maker invited the other party to verify it
statement may just be representation Ecay v Godfrey BUT if one party tells the other not to verify it, it would be a term Schawel v Reade
expand on whether there was a lapse of time between the statement being made and the contract being formed
longer the lapse, more likely it is a representation Routledge v McKay (there was a big interval between negotiations and contract)
what happens if the statement is found to be an express term?
remedies for breach of contract or breach of statutory implied conditions so then will consider damages, possibility of rejection and possible additional remedies
what happens if the statement is found to be a representation?
determine whether it amounts to a misrepresentation and if it does, consider remedies available
what is a misrepresentation?
a false statement of fact made by one contracting party to the other before the contract was made and which was one of the factors which induced the other party to enter into it
innocent party must establish that a misrepresentation has occurred
expand on there must be a false statement
can be oral, written or by conduct Spice Girls v Aprilia
what does it mean to say that conduct should be distinguished from silence?
silence itself will not amount to misrepresentation Hamilton v Allied Domecq
what are the exceptions to the rule that silence itself will not amount to misrepresentation?
where there is a fiduciary relationship between the parties e.g. solicitor and client, trustee and beneficiary
where the contract is one of the utmost good faith e.g. insurance contract
where there has been a half-truth i.e. where what was not said positively distorts what was actually said Curtis v Chemical
where a statement of fact is true when made, but a change of circumstances occurs before the contract is formed which makes the statement untrue- With v O’Flanagan
expand on the false statement must be fact not opinion or intention
if opinion is not genuine, there are no reasonable grounds for the maker to believe it to be true, or if the statement is made by a person who is in the best position to know the true facts, there may be an implied false statement of fact which may amount to a misrepresentation if the other elements of the definition are satisfied
Smith v Land House- Statements of opinion are statements of fact if they fall within the knowledge of the representer but not the representee.
BUT
Bisset v Wilkinson- statement of mere opinion on the subject matter of a sale is not an actionable misrepresentation, provided that the parties understand it to not be made on any factual basis.
expand on the statement must be made by one party to a contract to the other
if the maker of the statement is not the other contracting party, there cannot be a claim for misrepresentation- may be possible to bring a claim in tort for negligent misstatement or deceit
expand on the statement must have been one of the factors which induced the party to enter the contract
statement doesn’t have to be the only reason why a party enters a contract provided it did encourage that party to do so Edgington v Fitzmaurice, but if party hired experts to verify the statement etc there is no misrepresentation Attwood v Small
BUT can still claim that a false statement induced them to enter the contract if they were given the chance to verify the facts but did not take it up Redgrave v Hurd
who has the burden of proof for misrepresentation?
party who alleges that a misrepresentation has occurred
what are the remedies for misrepresentation?
rescission, damages
what is rescission?
when a misrepresentation occurs, the contract is valid unless/until the innocent party rescinds it- i.e. it is set aside or avoided
how do you rescind a contract?
innocent party must notify the other, C can also apply to a court for a formal order or rescission if the other party wont cooperate
what is the effect of rescission?
aim is to restore both parties as far as possible to their pre-contract positions, so if a contract is rescinded each party should return to the other any money or property transferred under the contract and are free from future obligations
what are the bars to rescission?
it’s an equitable remedy so the right to rescind will be lost in certain situations i.e. there will be a bar
where a bona fide purchaser has acquired rights in the property
affirmation
undue delay
where restitution is impossible i.e. to restore goods or property
expand on affirmation as a bar to rescission
can be express or implied, if someone knows about the misrepresentation but indicated that they were treating the contract as continuing, she could be regarded as affirming the contract and lose her right to rescind
expand on undue delay
leaf v international galleries- right to reject the goods for breach of a condition of the contract would have been barred as the C has the chance to examine the picture within a few days of purchase, so a delay of 5 years meant there could be no rescission
in calculating delay, the court doesn’t necessarily look at when it was discovered, but when it should have been discovered
expand on where it is impossible substantially to restore goods or property
restoration doesnt have to be exact Erlanger v New Sombrero- a court can take into account profits and make allowance for deterioration, but it cannot restore the parties precisely to the state they were in before the contract
what is indemnity?
if a contract is rescinded, the innocent party can claim on indemnity for expenses necessarily incurred as a result of entering into the contract- it is restricted an is only available as part of rescission
when is indemnity likely to be claimed?
in a situation where the C has no rights to damages
what are damages in lieu of rescission?
where C asks court for an order or rescission, the court may award damages in lieu of rescission under s2(2) of the Misrepresentation Act 1967 but only if it is non-fraudulent and the C has no rights to damages, the court has a discretion to award damages in lieu of rescission
when are damages awarded?
in addition to either rescinding or affirming, depends on whether the misrepresentation was fraudulent or not
what are damages for fraudulent misrepresentation?
if the innocent party can prove that the misrepresentation was made fraudulently they can sue for damages in tort of deceit- must show that the false representation was made knowingly or without belief in its truth or recklessly careless whether it be true or false
what are damages for non-fraudulent misrepresentation?
C may ask for damages under the s2(1) of the misrepresentation act 1967 and must show that there was a misrepresentation that caused loss and are awarded in accordance with tort principles Royscot Trust v Rogerson, damages should be awarded the same way as damages for fraudulent misrepresentation in the tort of deceit- the usual foreseeability rule does not apply
when can s2(1) be used?
only by a party to a contract against the other contracting party- i.e. where a person entered it after a misrepresentation has been made to them by another party
who has the burden of proof for s2(1)?
party making the misrepresentation as D must prove that the they had reasonable grounds to believe the facts were true otherwise they will be liable to pay damages
who has the burden of proving reasonable grounds for belief?
on the party making the statement and this is difficult to do Howard Marine v Ogden
what are negligent misstatements?
not limited to a statement of fact- can also be a statement of opinion and not limited to a false statement made by the other contracting party
what are advantages for suing for negligent misstatement?
statement doesn’t have to amount to a misrepresentation as such, i.e. there doesn’t have to be a contractual relationship between the parties and the statement need not be one of fact BUT usually better to bring action under s2(1) of MA 1967 as burden of proof is on D and damages are better
