Misrepresentation Flashcards
What is a misrep
A false statement made by a party in the contract that induces the other party to enter the contract.
What are the 4 elements of a misrep?
- There must be a false or misleading statement
- Statement must be fact
- Made by a party to the contract
- The statement must induce the other party into making the contract
What does Spice Girls v Aprilia show?
Words and conduct (e.g. appearing in the promotional material) can count as statements.
What does Fletcher v Krell show?
Silence is not a false statement.
What are the exceptions to the rule from Fletcher v Krell?
- Where the contract is one involving ‘utmost good faith’. This is where two parties have such a good relationship that non-disclosure will be a misrep, as in Lambert v Co-op Insurance.
- Making a half-true statement. Dimmock v Hallett - the past truth (not telling the buyer full information) was a misrep.
- Circumstances changing after a statement was made. - With v O’Flanaghan - The representor must explain the change.
- Consumer rights - When a business hides information that would help consumers make an informed choice.
What are not statements of fact?
- Statements of opinion
- Statements of future intention or conduct
- ‘Puff’ or mere sales talk
Discuss statements of opinion
Statements of opinion are not treated as fact (Bisset v Wilkinson) unless the opinion is given by a person with special knowledge or skill (Smith v Land and House Property Co).
Discuss statements of future intentions
Not a fact unless the party knew that intention was false when making it (Edgington v Fitzmaurice).
Discuss puff
Considered as empty boasts rather than fact. It should be considered whether the statement would make a reasonable person enter a contract.
Dimmock v Hallett - The statement was too vague to make a reasonable man enter the contract
Carlill - A clear statement can be treated as fact.
When is a false statement made by a party to the contract?
It must be a party in the contract making the false statement. If a third party makes the statement, there is no misrep.
What does it mean for the statement to induce the other party to the contract?
The party must know of the statement and it materially affected their decision to enter the contract.
What does Attwood v Small show?
Relying on a third party’s report, not the seller, meant the seller’s statement did not induce them to a contract.
What does Redgrave v Hurd show?
It does not matter if the party did not take reasonable steps to verify the statement, as long as they were convinced by it.
What are the 3 types of misrep?
- Innocent
- Negligent
- Fraudulent
(In increasing order of seriousness)
What is an innocent misrep?
S2(1) of the Misrepresentation Act 1967 defines an innocent misrep as one that is false, but which the representor believes to be true and has reasonable grounds to believe this, as in Leaf v IG.
What is a negligent misrep?
Where the representor believes the statement to be true but does not have reasonable grounds for believing this, as in Howard Marine v Ogden.
What is a fraudulent misrep?
Where the representor makes a statement that they do not believe is true, as in Derry v Peak
Why is it important to identify what type of misrep there is?
It affects how the remedies work.
What are the 2 main remedies for misrep?
- Rescission
2. Damages
What is rescission?
Rescission applies to all types of misrep. This is where the courts put the parties back into the position they were before the contract was made.
What are the bars to rescission?
- It is impossible to revert the parties, as in Clarke v Dickson
- The contract is affirmed. This is where the mislead party continues with the contract after knowing of the misrep, as in Long v Lloyd.
- Delay - If C leaves it too long before trying to rescind the contract, the court may not allow them to do so, as in Leaf v IG. The delay starts from when the misrep takes place, unless the misrep is fraudulent, when the delay starts from when the misrep is discovered.
- A third party gained rights under the contract. A third party may lose out innocently after rescission, as in Lewis v Avery.
Discuss Damages
Damages will vary depending on the type of misrep.
For innocent misrep, there is no automatic right to damages but S2(2) says damages can be awarded instead of rescission (one or the other), although rescission must be available.
For negligent misrep, damages are available as a substitute to rescission, set out by Salt v Strastone. If rescission is available, S2(1) shows the value of damages is the same as for fraudulent misreps.
For fraudulent misreps, damages can always be claimed for expenses or loss of profits, as in East v Maurer.
see photo for summary of remedies
