Misrepresentation

Question 1

What is the definition / elements of misrepresentation?

Answer 1

(a) unambiguous false statement
(b) made to the claimant
(c) which induces the claimant to enter into a contract with the statement maker

Question 2

Effect of misrepresentation

Answer 2

Makes the contract voidable. Wronged party must choose to rescind the contract.

Question 3

“False”

Answer 3

Will not be false if it is substantially correct + difference between what is represented and the actual position would not have been likely to induce a reasonable person in C’s position to enter the contract.

Question 4

What counts as a statement?

Answer 4

Must be a statement of fact asserting a given state of affairs. Must not be mere puff (e.g ‘the land is fertile and improvable’.

May be made by conduct, e.g concealing dry rot.

Question 5

“Induces C to enter the contract”

Answer 5

Representation must have been material: did the statement relate to an issue that would have influenced a reasonable person?

(a) if statement material, inducement inferred as matter of fact + burden shifts to D to show C not subjectively induced.

(b) If not material, C must prove that they were subjectively induced.

Question 6

Inducement: other rules

Answer 6

• misrepresentation need not be the only reason C entered the contract.
• where C makes its own investigations and relies on that as opposed to D’s misrep, no misrep.

Question 7

Statements of Opinion

Answer 7

As a general rule, statements of opinion cannot give rise to misrep.

Opinion: where representor has more knowledge or expertise than representee, statement of opinion may imply that there are facts to back this opinion up = misrep.

Question 8

Statement of Future Intention

Answer 8

As a general rule, statements of future intention cannot give rise to misrep.

Not a misrep if representor makes promise regarding future intention but is prevented from following that course of conduct / circumstances change so that they change their mind about their intentions. BUT if, at time statement made, they know that they cannot do what they state, or have no intention to do it = misrep.

Question 9

Silence

Answer 9

Silence = not misrep as a general rule.

BUT it is a misrep to make statements which are technically true but misleading (e.g property fully let, when you know tenants have given notice to quit).

If, at beginning of negotiations, statement made which is true but prior to entering the contract becomes false, duty to correct this.

Contracts of utmost good faith = e.g insurance contracts, disclosure of all material must be made to insurer. Also fiduciary relationships.

Question 10

Categories of Misrepresentation

Answer 10

1. Fraudulent (tort of deceit)
2. Negligent (statutory claim under s 2(1) of the MA 1967))
3. Innocent (statutory claim under s 2(1) of the MA 1967))

Question 11

What is fraudulent misrepresentation?

Answer 11

Must be proof of a false representation made knowingly, recklessly (careless of whether true or false) or without belief in the truth = flagrant disregard for the truth.

Must be deliberate or dishonest, not just due to inadvertence or failure to realise duty of disclosure.

Motive is irrelevant.

Question 12

What is a negligent misrepresentation?

Answer 12

Defendant liable for misrepresentation unless they can prove they had reasonable grounds to believe, and did believe up to the time of making the contract, that the statement was true. TREATED AS THOUGH THEY HAVE MADE A FRAUDULENT MISREPRESENTATION.

Question 13

What is innocent misrepresentation?

Answer 13

One not made fraudulently or negligently. Representor proves that they had reasonable grounds for believing their statement was true + that they believed that it was true up to the point of making the contract.

Question 14

Remedies for Misrepresentation 1 - Rescission

Answer 14

Equitable + discretionary remedy
- must not affirm contract
- clean hands, no delay
- only awarded where restitution possible (e.g contract valid until notice of intention to rescind given + asset passed to innocent third party).

Representee must communicate rescission to representor or initiate proceedings.

Question 15

Remedies for Misrepresentation 2 - Indemnity

Answer 15

Covers expenses for obligations assumed as a direct result of the contract (e.g paying council tax on land, stamp duty).

Question 16

Remedies for Misrepresentation 3 - Damages

Answer 16

1. Fraudulent Misrep - damages awarded on tort basis. Measure of damages necessary to place innocent party in position they would have been in without misrep. Claim for all losses even where unforeseeable. CONTRIBUTORY NEGLIGENCE NOT AVAILABLE AS DEFENCE.
2. Negligent Misrep - correct measure of damages also tort. Can claim back all losses even where unforeseeable. Contributory negligence available as defence. May seek damages in lieu of rescission where court does not allow rescission.
3. Innocent Misrep = rescission + indemnity to cover cost of legal obs arising out of contract entered into, no automatic right to damages but court may award damages in lieu of rescission.

Question 17

Misrepresentation and Exemption Clauses

Answer 17

Only available for negligent or innocent misreps.

Clause purporting to restrict liability or remedy must be reasonable.

Non-reliance clauses are legal but may have to be reasonable too if they do the above.

Question 17

Alternative Claims to Misrepresentation

Answer 17

1. Rep may become term of a contract if incorporated by the court. Action for breach of contract here.
2. Negligent mistatement at common law = relationship of sufficient proximity between 2 parties, court might find that one party owes a duty of care to other to take reasonable care to make accurate statements.