Misrepresentation Flashcards
What are the three categories of preliminary statements (pre-contract statements)?
1) Sales puff (extravert sales talk not meant to be believed and is not actionable if untrue);
2) Contract term (which will give rise to action for breach if untrue);
3) Representation (may be actionable as misrepresentation).
What is the primary test to decide which category the pre-contact statement falls within?
Primary test is what was the common intention of the parties when they entered into the contract.
If common intention of the parties is unclear, what are the guidelines the court considers to determine the nature of the pre-contract statement?
1) Whether one party had greater skill/knowledge of the subject matter (if expert makes preliminary statement to non-expert it may be deemed a term, but vice versa it may be a representation).
2) Whether statement made verbally was repeated in a written contract prior to the agreement (if so the statement was definitely a term, but if not it could still be a representation).
3) Whether the recipient of the statement made clear it was of vital importance (if so it’s definitely a term).
4) Whether statement maker invited other party to verify the statement (if so it ay be a representation, whereas if the statement maker told other party not to check it, its more likely to be a term).
5) Was there a lapse of time between statute being made and the contact being formed (longer the time lapse, the more likely the statement will be a representation).
Define misrepresentation.
An untrue statement of fact made by one party to a contract, by words or conduct, to the other contracting party, which induced the other to enter into the contract.
Explain the first requirement of misrepresentation - an untrue statement
This may be in writing, oral or by conduct.
General rule is silence will not amount to conduct for these purposes but there are exceptions.
When is silence deemed to be an untrue statement for the purposes of misrepresentation?
Silence usually doesn’t amount to conduct, but may amount to misrepresentation in the following situations:
1) There is a fiduciary relationship between parties;
2) Where there has been a half truth (eg car advertised as one lady owner, because all of the other owners were men - this is deliberately misleading and silence is not good enough as this should be corrected).
3) Where the contract is one of utmost good with (eg an insurance contract); and
4) Where a statement of fact is true when made but change of circumstances occurs before the contract is formed that makes the statement untrue, and that change is not subsequently disclosed.
Explain the requirement that the statement must be one of fact, not opinion or future intention.
Not all statements count as misrepresentation.
It must be a statement of fact as opposed to a statement of future intention or a statement being a reasonably held opinion of the party. However, if the party lies about their intention or otherwise states an opinion for which there are no facts it can reasonably be based, this will be a statement of fact.
Give an example of a statement of fact.
you’re buying a house which has a tenant living in part of it.
Seller tells you tenant is a ‘most desirable tenant’.
You buy the property ad then find put the tenant is in arrears with rent for sometime and seller knew this.
This statement would be a statement of fact and not opinion as the seller was aware tenant was in arrears and would not be a disable tenant (which they let on in their statement).
Can the misrepresentation be made by a third party (ie someone not party to the contract)?
No.
Explain the requirement that the statement must induce the other party into entering into the contract.
This effectively means the represented must rely on their statement.
This however would be negated if the represented took professional advice (eg a surveyor when buying a house) and relied solely on the advice from the expert (and not the statement).
Explain the test for fraudulent misrepresentation.
Misrepresentation is only fraudulent where it is made;
- with knowledge it is false; or
- without belief in its truth; or
- recklessly, not caring whether it is true or false.
There has to be some proof of fraud and this is usually tricky to establish.
What is the remedy for fraudulent misrepresentation?
Damages in the tort of deceit to the extent the claimant is out of pocket as a result of the misrepresentation, as well as damages to the extent of all consequential losses.
Remoteness of loss is NOT considered here.
Explain negligent misrepresentation.
Concerns statement made carelessly.
They are governed by s2(1) Misrepresentation Act 1967.
Misrepresentor is liable to pay damages where, even though the belief was reasonably held, it was not based on reasonable grounds.
Normal burden of proof is reversed, and it is upon person who made the statement to prove it was made on reasonable grounds.
C therefore only needs to establish a misrepresentation and their loss. D must then prove the statement had reasonable basis.
Explain the remedy for negligent misrepresentation.
All consequential losses are recoverable and aim is to put innocent party in the position they would have been if misrepresentation had not been made.
Explain innocent misrepresentation.
If misrepresentor can establish they had reasonable grounds to believe the statement was true, it is still a misrepresentation (but of an innocent nature.
No damages are available for this, however the misrepresentee may still be able to rescind the contract (as long as it is not recession barred).
