Misrepresentation - 1

Question 1

What is misrepresentation?

Answer 1

A misrepresentation is:

A false statement of FACT or LAW

WHICH

Induces a person to enter into a contract.

Question 2

Is a contract based upon a misrepresentation void or voidable?

Answer 2

Contracts based upon a misrepresentation are VOIDABLE

Question 3

False statements made before a contract is entered into can be incorporated as a term of the contract

Answer 3

Dick Bentley Productions Ltd v Harold Smith (Motors) (1965)

Statement by a car dealer that the car had only travelled 20,000 miles since an engine/gear box replacement was a term of the contract.

Statement was false.

Question 4

Dick Bentley Productions Ltd v Harold Smith (Motors) (1965)

Answer 4

False statements made before a contract is entered into can be incorporated as a term of the contract.

Statement by a car dealer that the car had only travelled 20,000 miles since an engine/gear box replacement was a term of the contract.

Statement was false.

Question 5

What are the FIVE requirements of misrepresentation?

Answer 5

1. The statement must be false.
2. It must be a statement (not silence).
3. It must be a statement of fact.
4. The other party must have relied upon that statement; and
5. The other party must have been induced to enter into the contract off the back of the statement.

Question 6

Avon Insurance plc v Swire Fraser Ltd (2000)

Answer 6

For a statement to be false, it simply needs to be incorrect.

The court held that to assess the falsity of the statement, you must consider whether the statement is “substantially correct”.

If the statement is “substantially correct”, then the test of falsity has not been met.

Question 7

Half Truths

Answer 7

Sometimes a statement conveys a misleading impression where important material facts are missing.

Dimmock v Hallett (1866)

Seller of land stated to a prospective buyer that certain farms were let.

The seller failed to disclose that a number of the tenants had actually given notice to quit.

Question 8

Dimmock v Hallett (1866)

Half Truths

Answer 8

Sometimes a statement conveys a misleading impression where important material facts are missing.

Seller of land stated to a prospective buyer that certain farms were let.

The seller failed to disclose that a number of the tenants had actually given notice to quit.

Question 9

Webster and Others v Liddington (2014)

Half Truths

Cow Material

Answer 9

Non disclosure of cow material in cosmetic injections.

The claimants were told that no cow material would be present.

Side effects form cow material affected 3% to 10% of the population.

The injections did have cow material of 0.02%.

Defendants are argued that the statement was substantially true, therefore no misrepresentation.

Court held that because 3% to 10% of the population could suffer side effects, the cow contamination, however small, was a material factor.

Question 10

Fox v MacKreth 1788

Silence

Answer 10

For a misrepresentation to take place, there has to be a statement made by one person that induces the other to enter into the contract.

Silence cannot usually amount to a misrepresentation

Question 11

Misrepresentation can be made by actions/conduct as well as statements

Spice Girls

Answer 11

Spice Girls Ltd v Aprilla (2002)

Failed to disclose that one of the band members was leaving.

Found the group were under a duty to correct the misrepresentation created by their conduct which implied they group would remain together.

Question 12

With v O’Flanagan (1936)

Doctor’s surgery

Answer 12

If a statement maker subsequently discovers before the contract is signed that the statement made is incorrect, they are obliged to disclose the facts to the other party.

Told a potential buyer that it was worth £2,000 per annum.

The contract was sold some months later, by which time most of the patients had left to find another doctor.

The seller’s failure to inform the buyer of the reduced value was held to constitute a misrepresentation.

Question 13

Does misrepresentation need to be a statement of fact or opinion?

Answer 13

Generally, the relevant statement must be a statement of fact in order for it to be actionable for misrepresentation

Question 14

Why is a statement of opinion less likely to be a misrepresentation?

Answer 14

An expression of opinion or belief will generally not amount to an actionable misrepresentation.

This is because people should generally be free to express opinions without them forming the basis of legal claims (unless defamatory).

Question 15

Bisset v Wilkinson (1927)

Land and Sheep

Answer 15

Statement of Opinion - validly held

Seller of land expressed an opinion that the land could accommodate 2,000 sheep.

Seller had no special knowledge, and the court held that it was an honest statement of opinion which was not a misrepresentation.

The opinion was honestly held.

Question 16

Statement of Opinion

Seller of land expressed an opinion that the land could accommodate 2,000 sheep.

Seller had no special knowledge, and the court held that it was an honest statement of opinion which was not a misrepresentation.

The opinion was honestly held.

Answer 16

Bisset v Wilkinson (1927)

Question 17

Smith v Land and House Property Corp (1884)

Statement of Opinion - invalidly held

Answer 17

Vendor described his property as being let to “a most desirable tenant”.

The tenant was actually in arrears.

Court found that the vendor could not possibly have held the opinion that the tenant was most desirable.

Held that the vendor had lied, and the misrepresentation was actionable.

Question 18

For a misrepresentation, the claimant must be induced by the representation

Answer 18

There can be no liability for misrepresentation unless the untrue statement caused the other party to enter into the contract.

If the statement did not influence them, or they were unaware of it, a claim of misrepresentation cannot be pleaded.

The test is whether the claimant was induced by the statement, not whether a reasonable man would have ben so induced.

Question 19

BV Nederlandse Industrie v Rembrandt Enterprises (2019)

Negligent and Innocent Misrepresentation

Answer 19

The test for inducement in cases of innocent or negligent misrepresentation…

Is that the representee has the burden of showing inducement….

In the sense he has to show that he would not have entered into the contract had the representation not been made

Question 20

Attwood v Small (1838)

Fraudulent Misrepresentation

Answer 20

Fraudulent Misrepresentation

Lord Wynford explained that [fraudulent] inducement will be shown if the claimant was “induced by the representation in any way”.

In this case, the sale of a mine was induced by accounts that were fraudulently prepared.

The claimant lost the case because he had his own accountants review them before purchase, so was not reliant on the fraudulent misrepresentation.

Question 21

No Reliance on the representation

Answer 21

The representee will be held not to have relied upon the untrue statement, and were therefore not induced in the following circumstances:

Where they were unaware of the misrepresentation.

Where the misrepresentation was not relied upon and the person used their own judgment.

Where the representee had their own means to be aware of the untrue representation.

Question 22

Horsfall v Thomas (1862)

Reliance or not

Answer 22

No Reliance on the representation as they were not aware of the statement

The buyer did not examine a gun before purchase. The concealment of a defect did not affect the purchase and he could not have been induced into the contract.

Question 23

No reliance – party had the means to be aware of the untrue representation

Answer 23

Redgrave v Hurd (1881)

Person induced into buying a solicitor’s practice and house by an innocent misrepresentation as to the value of the practice.

He was allowed to rescind the contract even though he had the opportunity to examine the accounts if the practice that would have identified the presentations about it were untrue.

Question 24

Can you be liable for third party statements?

Where you pass on a manufacturer’s statement as your own statement, then possibly.

Answer 24

Webster and Others v Liddington (2014)

The claimants were told that no cow material would be present. Side effects form cow material affected 3% to 10% of the population.

Court of Appeal held that the clinician’s had adopted the information as their own, so they were liable for any inaccuracies