Misrepresentation

Question 1

What is a misrepresentation?

Answer 1

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

Question 2

When can a misrepresentation be made?

Answer 2

Misrepresentations must be made during the time of negotiation

Question 3

What 2 things, other than a false statement, can also amount to misrepresentation?

Answer 3

Conduct and half-truths

Question 4

What are the 3 types of misrepresentation?

Answer 4

Fraudulent, Negligent and Innocent

Question 5

What is another term for fraudulent misrepresentation?

Answer 5

Action in deceit

Question 6

What is the definition of fraudulent misrepresentation?

Answer 6

A false statement that is made knowingly or without belief in its truth. Or recklessly, careless whether it be true or false

Question 7

Who holds the burden of proof for fraudulent misrepresentation cases?

Answer 7

The burden of proof lies on the victim to show that the criteria for fraudulent misrepresentation has been met

Question 8

When must a contract become voidable upon discovery of fraud?

Answer 8

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

Question 9

What are the remedies for fraudulent misrepresentation

Answer 9

Damages and recission

Question 10

What are the bars to recission?

Answer 10

• Lapse of time
• Affirmation
• Third party rights
• Impossible to return the parties to their original position

Question 11

What is the definition of negligent misrepresentation?

Answer 11

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

Question 12

What criteria must a party rely on to prove negligent misrepresentation?

Answer 12

• 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

Question 13

Who holds the burden of proof for negligent misrepresentation cases?

Answer 13

The defendant, who must show that their statement was not made negligently

Question 14

What are the remedies for negligent misrepresentation?

Answer 14

Damages and Recission

Question 15

What is innocent misrepresentation?

Answer 15

Misrepresentation that is neither fraudulent nor negligent

Question 16

When does innocent misrepresentation apply?

Answer 16

Occurs where the misrepresenting party honestly believes that statements made are true, and has reasonable grounds to believe so

Question 17

What are the remedies for innocent misrepresentation?

Answer 17

Recission, but courts may award damages in limited cases

Question 18

Bisset v Wilkinson [1927]

Answer 18

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

Question 19

Edgington v Fitzmaurice [1885]

Answer 19

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

Question 20

Keates v Earl of Cadogan [1851]

Answer 20

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

Question 21

Spice Girls v Aprilla World Service BV [2002]

Answer 21

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

Question 22

O’Flanagan [1936]

Answer 22

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

Question 23

Derry v Peek [1889]

Answer 23

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

Question 24

What did Hedley Byrne v Heller & Partners [1964] define?

Answer 24

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