Misrepresentation

Question 1

What are the three modern forms of fraud?

Answer 1

Misrepresentation, fraudulent concealment (sometimes) and improper negotiations (unfair advantage or pressure).

Question 2

What is the significance of the Ritchie v Glass 1936 case in relation to misrepresentation?

Answer 2

It establishes the criteria for an operative misrepresentation in Scots Law-
-A statement must be made by the contracting party or their agent (not a third party) (Universal Import Export GmbH v Bank of Scotland).
-Said statement must be made before the formation of the contract.
-Said statement must cause the other party to make an error. This error need not be essential but must be material (de minimis rule applies).
-The induced error must be such as would make it so that if it were not made any reasonable person in the circumstances of the party in error would’ve refrained from entering into the contract. In other words there must be a casual link between the party entering the contract and the error he was under.

Question 3

What intimations can constitute a misrepresentation?

Answer 3

Both inaccurate statements of fact and misleading behaviour can constitute a misrepresentation. Silence cannot constitute a misrepresentation (normally).

Question 4

Usually claims made in adverts are not to be taken literally, what is the exception to this and the authority for this?

Answer 4

In Bile Bean Mfg Co v Davidson (1906) 8F 1181 it was decided that advertisements could be misrepresentations where they claim to have a factual basis.

Question 5

What case is authority for the idea that positive misleading conduct can constitute a misrepresentation?

Answer 5

Paterson v Landesberg & Son (1905) 7 F 675

Question 6

In what circumstances might silence constitute a misrepresentation?

Answer 6

-Where there is a fiduciary relationship between the parties
-Where there is a change of circumstances these should be communicated
-Where a half-truth has been told
-Where the contract is a contract uberrimae fidei (of the utmost good faith)

Question 7

Normally expressions of opinion can not constitute misrepresentations (Bisset v Wilkinson), what is the exception to this and the authority for this?

Answer 7

Esso Petroleum v Mardon (1976) is authority for the proposition that where a person holds himself out to have special skill or knowledge when making a representation related to this skill with the intention of inducing another party to enter into a contract with him, he is under a duty of care to use reasonable care to ensure that his representation is correct. Where he gives unsound advise that induces the other party to contract with him then the misrepresentation is actionable.

Question 8

Normally statements of future intent cannot constitute a misrepresentation, what is the exception to this and the authority for this?

Answer 8

In British Airways Board v Taylor 1976 the court decided that a statement of intent could constitute a misrepresentation where the person has no intention of doing what he says (he misrepresents his true state of mind).

Question 9

In what situations is there a presumption that a statement is not intended to be a fact and therefore cannot be a misrepresentation?

Answer 9

-Advertisements
-Expressions of opinions
-Statements of future intent

Question 10

What are the three types of misrepresentation?

Answer 10

-Fraudulent Misrepresentation (knowledge or recklessness)
-Negligent Misrepresentation
-Innocent Misrepresentation

Question 11

What are the consequences for each type of misrepresentation?

Answer 11

All actionable misrepresentations make a contract voidable (subject to personal bar and restitutio in integrum). Damages in delict are possible when a misrepresentation is fraudulent, conversely damages for negligent misrepresentation are only available under the s.10 of the Law Reform (Misc Provisions)(Scot) Act 1985. No damages are available for innocent misrepresentations.