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LAW - MISREPRESENTATION > LAW - MISREPRESENTATION > Flashcards

LAW - MISREPRESENTATION Flashcards

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1
Q

Misrepresentation Definition

A

An actionable misrepresentation is an UNTRUE STATEMENT OF FACT WHICH INDUCES a person to enter a contract

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2
Q

ACT

A

Governed by both the common law and the Misrepresentation Act 1967 (MA 1967)

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3
Q

Key concept

A

A party must be able to have a contract set aside and/or claim compensation if there has been misrepresentation.

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4
Q

For misrepresentation there must be

A

An untrue statement of fact and NOT:

  • Opinion
  • Forecasts/statements of intention
  • Trading puffery
  • Statements of Law
  • Silence or non-disclosure

= which induces a person to enter a contract

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5
Q

An untrue statement of fact and not opinion

A

Opinion cannot be misrepresented if that opinion is incorrect.

It has to be an uninformed opinion ( Bisset v Wilkinson, 1927)

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6
Q

Case study - Bissett v Wilkinson (1927)

A

Case - W entered into a contract to sell B farmland.

     - W told B that the farm could carry 2,000 sheep
     - Land has never been used as a sheep farm
     - After 2 years of unsuccessful farming, B brought an action to cancel contract and get his money back

Issue: Fact or Opinion

Ruling - Sellers statement was a matter of opinion, and thus any statement to capacity would be an estimate

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7
Q

The statement must not contradict other facts known by the party giving the opinion

Case study - Smith v Land & House Property Corp (1884)

A

C - Mr Smith advertised hotel for sale, stated that it was let to Mr Fleck - ‘Desirable tennant’

  • Fleck owed rent + court action
  • Smith claimed his statement was opinion

I - Fact or opinion - Equal knowledge?

R - Held there was a misrepresentation relied on by LHP, Smith had no reason than otherwise to think that.

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8
Q

It is more likely to be an opinion if the giver is not better informed than the receiver.

Case study - ESSO petroleum Ltd v Mardon (1976)

A

C - Mr Mardon was buying a franchise of ESSO

  • Esso estimated that the station would sell 200,000 gallons a year
  • Mardon signed a 3 year tennancy- sales were less than half

I - Fact or opinion - Expert knowledge?

R - Held there was a Misrepresentation relied on by Mardon
- Esso professed to have a special knowledge.

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9
Q

An untrue statement of fact and not forecasts/statements of intention

A
  • A statement of future intention is not generally a statement of fact
  • Unless the person does not intend to perform that future action
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10
Q

Case study - Edgington v Fitzmaurice (1885)

A

C - Edgington lent money to a company on the basis it would be used to expand company
- Directors intended to use it to pay debts

I - Misrep - Forecasts/statements of intention

R - The directors were liable

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11
Q

An untrue statement of fact and not trading puffery

A
  • A statement of fact does not include exaggerated advertising or vague boasts.
  • The court will decide if a reasonable person would take the statement seriously
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12
Q

Case study - Trading puffery

Dimmock v Hallett (1866)

A

C - Some land was being auctioned off

- Land was described as having 'fertile and improvable"    - It was a poor quality of land    - Dimmock sued on the grounds of misrepresentation

I - trading puffery

R - The Court of Appeal held that the statement about the land ‘fertile’ was merely a ‘flourishing description’ and did not entitle the buyer to rescind.

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13
Q

An untrue statement of fact and not statements of law

A
  • In theory no one can be mislead as to what the law is because everyone is presumed to know the law.
  • However if the law is misrepresented it is actionable
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14
Q

Statements of law - Case Study

Pankhania v Hackney London Borough Council (2002)

A

C - The claimants bought a property, part of which was a car park
Council stated that tenants had 3 months notice
- Incorrect as the occupier was protected business Tennant under the Landlord and Tennant act 1954

I - Statements of law

R - The sellers incorrectly stated the law, there was remedy for misrep

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15
Q

An untrue statement of fact and not silence or non-disclosure

A
  • The general rule is there there is no legal obligation to disclose a material fact known to them
  • ‘caveat emptor’ - let the buyer beware
  • There are exceptions to the rule
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16
Q

Not silence or non-disclosure case study

Fletcher v Krell (1873)

A

C - An applicant for a job as a governess failed to disclose the fact she had previously been married and remained silent on the point

I - not silence or non disclosure

R - It was held that there was no misrepresentation

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17
Q

There are EXEMPTIONS TO THE RULE

  • Representations by conduct

Case Study - R v Barnard (1837)

A

C - Defendant wore an Oxford undergrad gown to an Oxford shop, to qualify for their credit scheme

I - Representations by conduct

R - There was misrepresentation

18
Q

There are EXEMPTIONS TO THE RULE

  • Deliberately concealing defects in goods

Case study - Gordon v Selico (1988)

A

C - Mr Gordon was to purchase a 99-year lease of a flat owned by the defendant Selico Ltd.
- Flat was poor conditions painted over dry rot

I - Deliberately concealing defects in goods

R - Held by the CoA that painting to conceal amounted to a misrepresentation

19
Q

There are EXEMPTIONS TO THE RULE

  • Half-Truths

Case study - Dimmock v Hallett (1866)

A

C - Farm land was described as having a Tennant but had given notice to quit

I - half-Truths

R - Statement was misleading as it was assumed they wouldn’t be leaving

20
Q

Misrepresentation - INDUCEMENTS

A
  • The statement of fact must induce the party to enter the contract
  • If there are misrepresentations that do not induce the party, then they are irrelevant
21
Q

INDUCEMENT - Case Study - Bannerman v White (1861)

A

C - Bannerman formed a contract with White, regarding the purchase of Hops

 - specifically enquired if the hops had received a sulphur treatment - White assured they were untreated

I - Inducement

R - The assurance WAS a condition of contract.

22
Q

CHALLENGES WITH PROVING INDUCEMENT
Where the representee has the opportunity to discover the truth but fails to take it

Case Study - Redgrave v Hurd (1881)

A

C - An elderly partner wanted to sell 1/2 his business, he gave the prospective purchaser details of the income and could be checked by documents
- Redgrave didn’t check, income was less than said

I - representee has the opportunity to discover the truth but fails to take it

R - Contract was rescinded on the grounds of innocent misrepresentation, relying on the representations as enough, no duty to inspect the papers.

23
Q

CHALLENGES WITH PROVING INDUCEMENT

- Where the representee tests the accuracy but fails to discover the truth

A
  • If the misrepresentation is fraudulent it will be actionable (policy)
  • If it is not fraudulent then it is not actionable because the representee will be relying on his own inspection, and will be induced by that
24
Q

Where the representee tests the accuracy but fails to discover the truth

Case Study - Attwood vs Small (1838)

A

C - Seller of mine exaggerated claims about the potential

  • The purchasers appointed their own sellers
  • Accounts really exaggerated income
  • Claimant sought to rescind the contract based on reports

I - Third party tests accuracy of statement

R - Claimant was unsuccessful, due to using external party to check

25
Q

CHALLENGES WITH PROVING INDUCEMENT

Where there is more than one inducement

A
  • If the misrepresentation is one of several statements which induced the contract it is still actionable
  • Only one false one is needed if you have relied on the untrue statement to some extent
26
Q

REMEDIES FOR MISREPRESENTATION

A

1) Remedy of Recession
- Sets the contract aside and puts the parties back to where they were

2) Damages
- Financial payment to compensate the injured party

Choice of category depends on category of misrepresentation
- Fraudulent, negligent and innocent

The effect of recession is one of restitution

It is not always possible to rescind the contract

27
Q

REMEDIES FOR MISREPRESENTATION

Case Study - Car & Universal Finance v Caldwell (1964)

A

C - Mr Caldwell owned a jaguar

  • A rogue Mr Norris convinced him to sell it for £965 cheque
  • Cheque bounced - he informed authorities
  • mr N sold the car, was sold until ended up at Car & UF.

I - Recission

R - Mr Caldwell had rescinded the contract as he had taken all steps necessary to not be bound by the contract - noted the old maxim.

28
Q

CIRCUMSTANCES WHEN THE RIGHT TO RESCIND MAY BE LOST

  • Where innocent party affirms the contract by indicating that they wish to continue and not rescind If you want to rescind you must STOP using the goods/services.

Case Study - Long v Lloyd (1958)

A

C - Lloyd advertised a lorry as being in ‘exceptional condition’.

  • mr long went to see it, on a trial run did 11 miles to gallon, he bought it
  • 2 days later only did 5 miles, many issues, Mr Lloyd fixed it for 1/2 price.
  • Broke down again Mr long sued.

I - Stop using goods/services

R - Held the contract had been affirmed, when it was fixed, Mr long chose no expert to ‘examine’.

29
Q

CIRCUMSTANCES WHEN THE RIGHT TO RESCIND MAY BE LOST

  • Where restitution is impossible

Case Study - Erlinger v New somber Phosphate Co (1878)

A

C - E set up a syndicate bought an island, with phosphate mines, sold to new somber for £110,000, sold shares failed had due up a lot of phosphate and could not be put back.

I - Where restitution is impossible

R - Court ordered recession, promoters should have appointed independent directors, and fully disclosed circumstances

30
Q

CIRCUMSTANCES WHEN THE RIGHT TO RESCIND MAY BE LOST

  • Lapse of time

Case study - Leaf v International galleries (1950)

A

C - Leah thought he was buying a painting from Inter galleries. IG said it was a Constable. 5 years later when he tried to auction it, leaf was told it wasn’t a constable, he claimed recession against IG to get his money back.

I - lapse of time

R - In essence the court told that there was no breach of contract, no ‘operational mistake’. But there was misrepresentation. However after 5 years the right to recession had lapsed.

31
Q

Categories of Misrepresentation

  • Fraudulent Misrepresentation
A
  • Recovery of all direct loss from relying on the fraudulent misrepresentation regardless of forseeability
32
Q

Fraudulent Misrepresentation - Case Study

Doyle V Olby (1969)

A

C - Mr Doyle bought a business from Olby. Said all business was behind the counter. But 1/2 came from travelling sales - Doyle sustained heavy losses
- Judge awarded £1,500 in deceit as a result

I - Damages for fraudulent misrepresentation

R - Increased damages to £5,500, Mr Doyle could claim for all damage flowing directly from the deceit.

33
Q

Categories of Misrepresentation

  • Common Law negligent Mis-statement
A
  • This is a false statement made with no reasonable grounds for believing it to be true
  • Hedley Bryne V Heller (1964) established liability for negligent mis-statement
  • Provides for recovery of compensation for financial damage through reliance by the claimant on statements made negligently by the defendant.
34
Q

Case Study - Hedley Bryne V Heller (1964)

A

C - HB had a customer, Escipower Ltd put in a large order. HB checked their financial position, so asked their bank to get a report from EpLTD bank, Heller & Partners.

  • Said it was good position, but wrote “without responsibility on the part of this bank”
  • EpLTD went into liquidation - HB sued Heller

I-Common Law negligent Mis-statement

R - The HoL found for Heller because of the exclusion clause.

35
Q

Mis-statements

A
  • Principle also applies to mis-statements made during pre-contractual negations
  • To apply, there must be a ‘special relationship’ between parties.
  • Under the tort of negligence, damages must be reasonably foreseeable and the loss must not be remote.
36
Q

SPECIAL RELATIONSHIP

  • Not fully defined on the Hedley Bryne Case, Includes:
A
  • A reliance by the claimant on the defendants specialist skill and judgement
  • Reasonable expectation of knowledge on part of the defendant
  • Reasonability for the claimant to rely on the defendent
37
Q

Misrepresentation Act 1967

A
  • Introduced negligent misrepresentation
  • Enacts the category of wholly innocent misrepresentation
  • Supersedes the common law remotely of fraudulent misrepresentation
38
Q

Negligent Misrepresentation Under the Act S2(1)

A

2 Main reasons for its use:

1) The burden of proof is reversed
2) The remedies are recession and/or damages. The person who made the representation will be liable to the same remedies as if they were fraudulent.

39
Q

Act S2(1) Case Study - Royscot v Rogerson (1991)

A

C - Rogerson acquired on hire purchase a used car. Got finance company Royscott Trust Ltd.
- The dealer filled wrong amounts in application making it below policy of 20%, Rogerson sold car, Royscott sued car dealer as figures were wrong.

I - Negligent

R _ Car dealer was liable, had to pay losses incurred to Royscott Trust.

40
Q

Negligent Misrepresentation Under the Act Wholly Innocent Misrepresentation S2(2)

A
  • This is a ‘false statement made by a person at the time had reasonable grounds to believe it was true’
  • At common law the remedy for misrepresentation was recession ONLY
  • Under the act, recession is still available, BUT court’s now have the discretion to award damages in lieu of recession
41
Q

Act Wholly Innocent Misrepresentation S2(2)

Case Study - William Sindall Plc v Cambridgeshire CC (1994)

A

C - Sindall agreed to buy land from CC after they were told the council were aware of no easements. But a private sewer was found after completion. Sindall sued for recession misrepresentation and common mistake

I - Innocent mis-statement

R - Held, damages would have been awarded, but found not to have been misrepresented.

42
Q

Exemption / Limitation Clauses - S3

A
  • S.3 of misrepresentation Act 1967 was replaced by S.8 unfair contract Terms Act 1977.
  • It states that for the misrepresenter to exclude liability for the mis-statement they must show the clause satisfies the tests reasonableness
  • This applies for all contracts and not just business contracts

LAW - MISREPRESENTATION (2 decks)

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