Misrepresentation Flashcards
What is a misrepresentation?
A misrepresentation is a false statement of material fact made by one party to another that leads to the formation of a contract
Such statements are not intended to be binding obligations, but they must have induced the other party to enter the contract
When can a misrepresentation be made?
Misrepresentations must be made during the time of negotiation
What 2 things, other than a false statement, can also amount to misrepresentation?
Conduct and half-truths
What are the 3 types of misrepresentation?
Fraudulent, Negligent and Innocent
What is another term for fraudulent misrepresentation?
Action in deceit
What is the definition of fraudulent misrepresentation?
A false statement that is made knowingly or without belief in its truth. Or recklessly, careless whether it be true or false
Who holds the burden of proof for fraudulent misrepresentation cases?
The burden of proof lies on the victim to show that the criteria for fraudulent misrepresentation has been met
When must a contract become voidable upon discovery of fraud?
The contract must be made voidable as soon as the fraud is discovered. Where goods have already been sold to a third party, this action is no use
What are the remedies for fraudulent misrepresentation
Damages and recission
What are the bars to recission?
- Lapse of time
- Affirmation
- Third party rights
- Impossible to return the parties to their original position
What is the definition of negligent misrepresentation?
Where a party has specialist knowledge on a topic and the victim relies on this
If a financial loss occurs because of a reliance on a seller’s information and expertise, a case for negligent misrepresentation may be made if there is a special relationship between the parties
What criteria must a party rely on to prove negligent misrepresentation?
- The party making the statement must have particular knowledge
- There must be sufficient proximity - it is reasonable to rely on the statement?
- When the statement is relied upon, the party making the statement is aware of this reliance
- The party making the statement must have assumed responsibility to give advice and information
Who holds the burden of proof for negligent misrepresentation cases?
The defendant, who must show that their statement was not made negligently
What are the remedies for negligent misrepresentation?
Damages and Recission
What is innocent misrepresentation?
Misrepresentation that is neither fraudulent nor negligent
When does innocent misrepresentation apply?
Occurs where the misrepresenting party honestly believes that statements made are true, and has reasonable grounds to believe so
What are the remedies for innocent misrepresentation?
Recission, but courts may award damages in limited cases
Bisset v Wilkinson [1927]
Facts: A representation by the seller as to the number of sheep some land could hold was based on opinion, not expert knowledge
Held: It was an honest opinion and did not constitute misrepresentation
Edgington v Fitzmaurice [1885]
Facts: The directors of a company borrowed money saying they would use the loan for the improvement of company buildings. They actually intended to use it to pay off debts
Held: It was a false statement of material fact. It did amount to misrepresentation
Keates v Earl of Cadogan [1851]
Facts: The Earl let a house, knowing it was in shambles. He knew Keates wanted to live in it immediately but failed to say something about its state
Held: Silence does not amount to misrepresentation
Spice Girls v Aprilla World Service BV [2002]
Facts: The Spice Girls entered an endorsement contract with D. There was no term that they must say if there was a spit, but days after a promotional shoot, Geri left the band. The band were sued for misrepresenting they were staying together
Held: By attending the photoshoot, the Spice Girls gave the impression that they were staying together, by conduct. This was a misrepresentation
O’Flanagan [1936]
Facts: A doctor was selling his practice, stating an income of £2000 a year. This was true until he became unwell. He failed to inform the buyer of this at the time of sale and the buyer discovered a lower income
Held: This was a misrepresentation. This was a statement of fact so the buyer should have been updated
Derry v Peek [1889]
Facts: A company issued a prospectus looking for people to buy shares. They stated they had been given permission to use steam power even though this had not been granted yet. They believed it would. Permission was denied
Held: They were not liable under the tort of deceit. They believed permission would be granted
What did Hedley Byrne v Heller & Partners [1964] define?
Defined negligent misrepresentation
If a financial loss occurs because of a reliance on a seller’s information and expertise, a case for negligent misrepresentation may be made if there is a special relationship between the parties
