Fraud and Misrepresentation (L9) Flashcards
What were the traditional grounds for challenge under Roman law?
Fraud (dolus).
Error.
Force and fear (metus).
What is fraud?
Dolus.
Fraudulent behaviour.
Fraudulent conduct of negotiations.
Dishonest behaviour.
- Bona fides (good faith).
- Mala fides (bad faith).
How did Erskine define fraud (III, 1, 16)?
“A machination or contrivance to deceive”.
What was the decision in Richie v Glass 1936 and what did Lord Carmont say?
Buyer required a certain amount, the length he was told he would get was not the actual amount.
The types of issues which can lead to misrepresentation are wider than just the essential terms of the contract.
Lord Carmont:
“When misrepresentation by a party is alleged inducing error in the other in regard to some matter, that matter need not be an essential to the contract, but it must be material and of such a nature that not only the contracting party but any other reasonable man might be moved to enter into the contract or … if the misrepresentation had not been made, would not have entered.”
What are the criteria for an operative misrepresentation?
“Statement” made by other contracting party.
- Not third parties.
Prior to formation of the contract.
Causes an error (must be material but not essential).
De minimis rule.
Causal link between the error and formation of the contract.
- The mistaken belief was the reason for entering into the contract.
- Test is objective (reasonableness).
What are the consequences of a misrepresentation?
The contract is voidable, and can be set aside if 2 conditions fulfilled.
Rescinding party must not be personally barred.
- Inconsistent behaviour, person has already acted on the contract then argue the defect.
- No substantial delay in seeking to rescind.
Restitutio in integrum must be possible.
- Return parties to original position.
- Boyd & Forrest v Glasgow & SW Railway Co 1915.
- Railway construction, error made in judgement, project more expensive than originally thought.
- Restitutio in integrum was not possible, work had already begun.
- But note Spence and Crawford 1939 SC (HL) 52 at 70:
- “It is well established that the doctrine is not to be applied too literally”.
Does an inaccurate statement of fact (in the form of an ADVERT) constitute a misrepresentation?
Generally to attract attention, not necessarily a statement of fact.
NOT unless the ad claims to have a factual or scientific basis.
Bile Bean Manufacturing Co v Davidson (1906).
- Claimed that the chemical composition of the beans was discovered by Charles Ford, used by natives previously.
- No such person existed, claiming to have a scientific basis.
Does an inaccurate statement of fact (in the form of a statement of OPINION) constitute a misrepresentation?
Not generally.
Unless given by an expert.
Bisset v Wilkinson [1927].
- Claimed land held 2000 sheep when it did not.
- Held not to be a misrepresentation because he was not an expert.
Esso Petroleum v Mardon (1976).
- Experienced sales rep claimed the garage would have a very high petrol turnover, but it did not.
- Held to be a negligent misrepresentation. He did not research this information.
- He was in a position of reliance, had a DoC.
Does an inaccurate statement of fact (in the form of a statement of INTENTION) constitute a misrepresentation?
Not generally.
When does misleading behaviour constitute a misrepresentation?
Paterson v Landesberg (1905).
- Distressed a piece to make it look antique, placed it with antiques and sold it for a high price.
- Held it was a misrepresentation, positive conduct.
Lyon & Turnbull v Sabine [2012] CSOH 178.
- Piece was “made to deceive”.
- Not held to be an actionable misrepresentation.
- Seller didn’t have expert knowledge, didn’t know it was fake, he bought it at an auction.
- Distinguished Paterson. Intent to deceive, but not present here.
When does silence constitute a misrepresentation?
Where there is a duty to speak out e.g. relationships of reliance (fiduciary duty).
- Fraudulent concealment.
- Broach v Jenkins.
- Fiduciary duty.
- Positive misleading conduct.
- Misleading half-truths.
- Contracts in utmost good-faith (uberrimae fidei).
What are the 3 types of misrepresentation?
Fraudulent misrepresentation.
Negligent misrepresentation.
Innocent misrepresentation.
What is fraudulent misrepresentation?
Knowledge or recklessness.
- Derry v Peek.
- Bile Bean Manufacturing Co v Davidson.
- McLeod v Kerr.
Voidable.
- Can be rescinded if restitutio in integrum is possible.
- Damages (delict).
What is negligent misrepresentation?
Acting/speaking carelessly.
- Only where there is a DoC (Esso Petroleum).
Voidable.
- Can be rescinded if restitutio in integrum is possible.
- Damages - Law Reform (Miscellaneous Provisions) (Scotland) Act 1985, s10.
What is innocent misrepresentation?
Honest belief, but turns out to be inaccurate.
- Boyd & Forrest v Glasgow & SW Railway Co 1912.
- First case the term was used in.
Voidable.
- Can be rescinded if restitutio in integrum is possible
- No damages.
