Misrepresentation

Question 1

Three ways

What three ways can a representation be made?

Answer 1

It ca be oral, written or by conduct.

Question 2

Key Elements - Conduct

Spice Girls Ltd v Aprilia [2000] - Ginger leaving

Answer 2

S (promoter) entered into discussion w A to have the girls endorse their products. Before contract signed, girls filmed an ad for A. At the time, S knew ginger intended to leave but didn’t tell A.
Held filming by the girls was a representation to A that the co didn’t know nor could have reasonably known one member intended leaving
This was untrue and the act of filming was deemed a misrep by conduct and by remaining silent.

Question 3

Key Elements - Conduct - Silence

Gil v McDowell [1903] - Hermaphrodite Cow

Answer 3

Silence usually not actionable unless it is an active misrepresentation:
Farmer brought animal to market where heifers and bulls sold. G bought it on this basis.
Held the seller’s silence as to fact it was a hermaphrodite amount to a misrepresentation in circs.

Question 4

Key Elements - Representation must be False

Dimmock v Hallett [1866] (i) Tenancy Half-truth

Answer 4

In selling some farm land, H told D all of the farms were under tenancy, which was factually true
H failed to mention that all of the tenants had given notice to vacate their land.
Held this half-truth was sufficient to amount to misrepresentation.

Question 5

Key Elements - Representation must be False

With v O’Flanagan [1936] (ii) Change in Circumstance - Medical Practice

Answer 5

W bought a medical practice from O. W induced to buy by O’s statement that it made £2k p/a.
True at the time, but O became ill and many patients went elsewhere. Became virtually worthless
Held where a statement is rendered false by a change in circumstances there is a duty to disclose the change. A failure to do so will result in an actionable misrepresentation.

Question 6

Key Elements - Representation must be a statement of fact, not intention or opinion

Wales v Wadham [1977] Internet to remarry - 13k

Answer 6

Statement of intention can’t be false at time made as it can only be made true/false by a future event:
W separating from H told him she’d no intention of remarrying. Agreement made whereby she would receive £13k from the sale of their home. She later remarried. H argued misrepresentation.
Held no misrepresentation: the statement was honestly made and was true at the time it was made.

Question 7

Key Elements - Representation must be a statement of fact, not intention or opinion

Esso Petroleum v Mardon [1976] - Expertise - Calculating Sales

Answer 7

Opinions also can’t amount to representation unless representor has a specialist knowledge:
An oil co (M) confirmed a certain petrol station would produce a certain level of sales.
This was taken as statement of fact on basis the representee was entitled to believe the oil co had exercised skill and care in calculating the figure.
The statement of opinion was treated as one of fact and bc untrue, amounted to misrepresentation.

Question 8

Key Elements - Representation must induce the other party into the contract

Smith v Chadwick [1884] - Inducement - “No bearing”

Answer 8

Misrep claim dismissed when admitted the statement had no bearing on P’s decision to buy shares
Not necessary to show it was the sole reason for entering the contract.
Must show it was a real and substantial reason for entering the contract.

Question 9

Key Elements - Representation must induce the other party into the contract

Edgington v Fitzmaurice [1885] - Debentures - Prospectus

Answer 9

E bought debentures based partly on a misleading prospectus. As it was a real and substantial reason, held this amounted to misrepresentation

Question 10

Key Elements - Representation must induce the other party into the contract

Attwood v Small [1838] - Reliance - Mine Survey

Answer 10

If there was no reliance on the false statement, then there is no action:
Purchase of mine mistakenly informed of its excellent potential. But before the sale, purchaser had done own independent survey on the mine. As no reliance, the statement wasn’t actionable.

Question 11

Key Elements - Representation must induce the other party into the contract

Redgrave v Hurd [1881] - Neg wont cure Misrep

Answer 11

Agreement that H would become partner in R’s solicitors practice and buy R’s house.
R represented to H that the practice made £300-400 a year. R showed H docs that indicated the profits were actually much less, but H never inspected the docs in detail.
Held the misrep stood: misrep not gotten rid of if representee is guilty of negligence.

Question 12

Special Position of Contracts Uberrimae Fides

Rozanes v Bowen [1928] - Disparity of info in parties to insurance - UF

Answer 12

Held insurance contracts require full disclosure from the party seeking insurance as the underwriter knows nothing and the man asking him to insure knows everything.

Question 13

Special Position of Contracts Uberrimae Fides

Harmon v Irish Life Assurance [2018]:

Answer 13

Insurance co also has a duty of utmost good faith.

Question 14

Special Position of Contracts Uberrimae Fides - Materiality

Chariots Inns Ltd v Assicurazioni SPA [1981] - Related co previous fire - UnderW didnt care - Obj Test

Answer 14

Necessary to disclose all material details. Objective Test for materiality:
C sought insurance for premises. Insurance co sought to avoid the contract on basis C hadn’t disclosed that previously premises owned by a related co of C was damaged in a fire.
Underwriter admitted if he knew this it wouldn’t have affected him.
SC held the test for materiality is objective: not relevant what the insured or underwriter thought.
Test: It’s a matter or circumstance that would reasonably influence the judgment of a prudent insurer in deciding whether he would take the risk and if so in determining the premium.
Held the insurance co was entitled to repudiate the contract on this basis.

Question 15

Special Position of Contracts Uberrimae Fides - Materiality

Pan Atlantic Insurance Co v Pine Top Insurance [1994] - Even if unnafected

Answer 15

Test modified: Information a reasonable prudent insurer would like to know even if it ultimately did not affect his decision to take the risk.

Question 16

Special Position of Contracts Uberrimae Fides - Materiality

Aro Road & Land Vehicles v Insurance Corp of Ireland Ltd [1986 - Reasonable Proposer - Petty conviction

Answer 16

IRISH TEST: ‘Reasonable Proposer’
MD and main shareholder of co failed to disclose he’d a conviction for stolen goods 20 years ago
While upholding reasonable insurer test, court felt this case was justified as an exception.
McCarthy J said a proposal form normally has a number of Qs to be answered, but he was never given one in this case: thus no reason to think he would’ve recounted a 20 y/o petty conviction
Held if no questions are asked, in the absence of fraud, insurer can’t repudiate contract on grounds of misrepresentation. For over-counter insurance (simply filling in names), insurer is accepting something less than the usual standard in terms of disclosure.

Question 17

Special Position of Contracts Uberrimae Fides - Materiality

Kelleher v Irish Life Assurance Co Ltd [1993] - Reasonable man - No spec req

Answer 17

Test of materiality should focus on ‘reasonable man reading the insurance form and what he’d think would be material info even if not specifically requested.

Question 18

Special Position of Contracts Uberrimae Fides - Materiality

Keating v New Ireland Assurance [1990] - Not omniscience - Gastric distress

Answer 18

While the test appears stringent, the insured is not inspected to be omniscient:
At the time of the form, K disclosed he was suffering from minor gastric complaint. He didn’t realise he had angina. He died and N sought to avoid the contract on non-d of material info
Held ‘full disclosure’ related to actual knowledge: honest is all that is required.

Question 19

Special Position of Contracts Uberrimae Fides - The “Basis of the Contract” Clause

Keenan v Shield Insurance Co [1987] - £34 claim

Answer 19

Clauses included by insurance companies: it means the insured warrants all the answers provided are true and complete and it imposes a strict liability on the insured if answer defective even if honest.
- K stated in house insurance form that he’d made no previous claims. He had made a claim for £35 but forgotten. BC clause upheld.

Question 20

Special Position of Contracts Uberrimae Fides - The “Basis of the Contract” Clause

Keating v New Ireland Assurance [1990] - Contra Proferentem & Known

Answer 20

Due to their harshness, they are interpreted strictly and contra-proferentem:
Court interpreted the BC clause as requiring him to disclose all answers known to him.

Question 21

Special Position of Contracts Uberrimae Fides - Section 46 SGSS 1980: The Exemption Clause

Walker v Boyle [1982]

Answer 21

An exemption clause to avoid liability re false statements must be fair and reasonable.
Land seller made statements misrepresenting whether there was disputes re the land ownership. Sought to rely on clause saying ‘no error, misstatement or omission re the prop shall annul the sale’. Held this was not fair and reasonable in the circs.

Question 22

Special Position of Contracts Uberrimae Fides - Reform

What did the LRC Consultation Paper on Insurance Contracts 2011 recommend?

Answer 22

Duty of disclosure should be restricted to facts the insured has actual knowledge of.
Insurer should be required to show non-disclosure of a material fact played a part in their decision to enter the contract.
Insurer should be under statutory duty to explain to proposer both the nature of the duty of disclosure and the consequences of non-disclosure.

Question 23

Categories of Misrepresentation - Fraudulent

Derry v Peek [1889] - Rail service

Answer 23

This is an action in the tort of deceit Where a person makes a false statement they know to be false or is reckless as to whether it is true or false i.e. they must have an honest belief it is true:
Promoters of a co issued a prospectus stating the co had a right to run train service.
They believed this to be true, but it wasn’t. Believed obtaining the consents was a formality only
Held there was no fraudulent misrepresentation as they honestly believed it was true.

Question 24

Categories of Misrepresentation - Negligent

Hedley Byrne v Heller [1964]

Answer 24

Action in tort requires a duty of care to exist.

Question 25

Categories of Misrepresentation - Negligent

Esso Petroleum v Mardon [1976]

Answer 25

Action in contract requires a contract result from the misrep

Question 26

Categories of Misrepresentation - Negligent

Thomas Witter v TBP Industries [1996] - Unaware of negligent accounts

Answer 26

D sold co to P on basis of audited accounts that gave false image of financial position as they were prepared negligently. D not aware of errors so didn’t act dishonestly, but did act negligently

Question 27

Categories of Misrepresentation - Innocent

What is this?

Answer 27

Neither falsely nor negligently made but is nevertheless untrue.

Question 28

Equitable Remedy of Rescission - Affirmation

Re Hop and Malt Exchange and Warehouse Co [1866]

Answer 28

Right to rescind lost if after discovery, the representee still continues with or affirms the contract:
P induced to buy shares by D’s misleading prospectus. After discovery, he continued to deal with the shares. Later tried to rescind. Held his actions were affirming the contract. No rescission.

Question 29

Equitable Remedy of Rescission - Delay /Laches

Leaf v International Galleries [1950] - Wrong name of artist

Answer 29

Delay of 5 years held to be too long where innocent misrep as to name of an artist was made.

Question 30

Equitable Remedy of Rescission - Delay /Laches

O’Kelly v Glenny [1846] - Misrep by Solicitor

Answer 30

Where a fraudulent misrep was made by solicitor to P which caused her to sell her interest in her dead father’s estate to him, court rescinded contract 10 years later!

Question 31

Equitable Remedy of Rescission - Doctrine in Seddon v North Eastern Salt

Seddon v North Eastern Salt [1905]

Answer 31

Right to rescission lost once contract is executed.
Right is only lost in cases involving innocent misrep.
But application has been limited by s.44 SGSS 1980 which states a right won’t be lost even where contract is executed for a contract of sale of goods, supply of services, hire purchase and contracts for letting of goods.

Question 32

Equitable Remedy of Rescission - Restitutio in Integrum is impossible

Clarke v Dickson [1858] - Mine

Answer 32

Order of rescission wont be granted where courts believed full restitution is impossible i.e. impossible to put parties back in original position:
Rescission for sale of mine reused as all its reserves were exhausted.

Question 33

Equitable Remedy of Rescission - Rights of Third Parties

Anderson v Ryan [1967]

Answer 33

Rescission won’t be granted where it would unfairly prejudice the rights of third parties:
D agreed to swap his car for another, but didn’t realise the other party had fraudulently represented that he had good title to the car. Gardaí recovered D’s original car & returned it
But the car had been sold by the fraudster to A who had sold it on to R
Held a misrepresentation only makes a contract voidable not rescindable
As R bought the car in good faith w/o knowledge of defect in A’s title, he was entitled to keep the car and D was barred from obtaining a grant of rescission.

Question 34

Equitable Remedy of Rescission - Statutory Remedies

What section of SGSS 1980 and Howard Marine Co v A Ogden Excavations [1978]

Answer 34

S.45(1) SGSS 1980 Right to damages for innocent misrepresentations (unless representor can prove they believed or had reasonable grounds to believe the truth of the statement).

P hired barges from D. D stated the capacity of the barges ‘from his memory of the shipping docs’ as 1,600 tonnes. Turns out to be 1,055. D pleaded innocent misrepresentation.
Held D couldn’t show it was reasonable to rely on recollection rather than docs. Damages.

Question 35

Equitable Remedy of Rescission - Statutory Remedies

Floods of Queensferry Ltd v Shand Construction [2000]

Answer 35

Appears the right to damages is lost if the right to rescission is i.e. lapse of time, etc.:
the court indicated that at the time of the hearing of the app for damages in lieu of rescission, rescission should be a “live” remedy.