Misrepresentation

Question 1

What are the three types of pre-contract statements?

Answer 1

1. Sales puff
2. A contract term
3. A representation, which may be actionable as a misrepresentation

Question 2

When may silence amount to misrepresentation?

Answer 2

Fiduciary relationship between the parties

Where contract is one of utmost good faith (e.g. insurance contract)

Where there has been a half-truth

Statement of fact is true when made but a change of circumstances occurs before contract is formed that makes statement untrue

Question 3

Can a statement of opinion or future intent amount to misrepresentation?

Answer 3

No, only a statement of fact

Question 4

Does the statement of fact need to be the only inducement for the other party to enter into the contract, in order to be misrepresentation?

Answer 4

No, but it must induce them even if only a partial reason

Question 5

What are the 3 types of misrepresentation?

Answer 5

1. Fraudulent misrep
2. Negligent misrep
3. Innocent misrep

Question 6

When is misrepresentation fraudulent?

Answer 6

If made:

1. With knowledge it is false, or
2. Without belief in its truth, or
3. Recklessly, not caring if true or false

Question 7

When is misrepresentation negligent?

Answer 7

When although the belief in the truth of the statement was honestly held, it was not held on reasonable grounds

Question 8

What is the burden of proof in negligent misrepresentation?

Answer 8

Reverses normal burden of proof of who has to prove belief was reasonably held – misrepresentor to prove they made the statement on reasonable grounds

Question 9

When is misrepresentation innocent?

Answer 9

If the misreprsentor can establish that they had reasonably grounds to believe their statement was true

Question 10

What is the effect of any misrepresentation?

Answer 10

The contract is voidable - therefore innocent party can choose to either affirm or rescind the contract

Question 11

When are damages for misrepresentation available?

Answer 11

For either fraudulent or negligent misrep

Question 12

In what circumstances is the right to rescind lost? I.e. the 4 bars to recission

Answer 12

1. Affirmation – innocent party upon discovering the misrepresentation elects to treat contract as continuing
2. Undue delay
3. Where innocent purchaser has acquired an interest in the subject matter of the contract before purported rescission of the contract
4. Where impossible substantially to restore goods or property

Question 13

Does a party have the right to correct incorrect assumptions from the other party?

Answer 13

No - rule of “buyer beware” means that generally there is no obligation to say something unless asked