Misrepresentation Flashcards
Misrepresentation definition
A false statement of fact which induces the other party to enter into the contract.
Pre-contracual
Occurs before the contract is made.
The effect of misrepresentation.
The contract will be voidable for misrepresentation.
Void definition
Automatically of no effect from the very beginning. The contract is treated as if it was never made.
Voidable definition
May be set aside by one party. The setting aside is not automatic, but requires action. Once the contract is set aside, it is treated as if it had never been made.
4 Steps for the structure of misrepresentation
- Distinguish a term of a contract from a representation.
- Identify an actionable misrepresentation.
- Distinguish between the different types of misrepresentation.
- Analyse the remedies for misrepresentation.
Representation or term? Heilbut, Symons & Co v Buckleton [1913] AC 30
Intention of the parties is paramount.
Viewed objectively.
Representation or term, indicators? Routledge v McKay [1954] 1 WLR 615.
The timing of the statement.
Statements reduced to writing.
Representation or term, indicators? Bannerman v White [1861] 10 CBNS 844
The importance of the statement.
Representation or term, indicators? Dick Bentley Productions Ltd v Harold Smith Motors Ltd [1965] 2 AII ER 65 & Oscar Chess Ltd v Williams [1957] 1 AII ER 325.
Specialist knowledge and skill.
Representation or term, indicators? Ecay v Godfrey [1947] 80 Lloyd’s Rep 286.
Opportunity to verify.
The 5 Indicators of representation or terms.
- The timing of the statement.
- Statements reduced to writing.
- Importance of the statement.
- Specialist knowledge and skill.
- Opportunity to verify.
The cases for indicators of representation or terms.
- Routledge v McKay
- Routledge v McKay
- Bannerman v White
- Dick Bentley Productions Ltd v Harold Smith Motors Ltd & Oscar Chess Ltd v Williams
- Ecay v Godfrey
Actionable misrepresentation
A false statement of fact which induces the other party to enter into the contract.
A false statement of FACT.
Only a false statement of fact will form the basis of an actionable misrepresentation.
Statements that are not usually actionable.
Statements of Future intention, Law or Opinion are generally not actionable.
Statement of future intention. Edington v Fitzmaurice [1885] 29 Ch. D. 459. Quotation.
Bowen LJ:
“the state of a man’s mind is as much a fact as the state of his digestion…if it can be ascertained it is as much a fact as anything else. A misrepresentation as to the state of a man’s mind is, therefore, a misstatement of fact.”
Edington v Fitzmaurice [1885] 29 Ch. D. 459.
Forms the basis only when statement of future intention is not genuinely held.
Statements of law. Case.
Solle v Butcher [1949] 2 AII ER 1107
Statements of law. Recent approach. Cases.
Kleinworth v Lincoln City Council [1999] 2 A.C. 349.
Pankhania v Hackney London Borough Council [2002] N.P.C. 123.
Statements of opinion. Case.
Bisset v Wilkinson [1927] AC 177.
“2000 sheep”
Statements of opinion. Case.
Smith v Land and House Property Corporation [1884] 28 Ch D 7.
“ A most desirable tenant.”
Statements of opinions. 3 Steps.
- Was the statement made honestly?
- Does the party imply they have information on which to base their opinion.
- Does the party have particular skill/ knowledge ( Esso Petroleum v Mardon [1976])
A False statement. Representation by conduct. Case.
Spice Girls Ltd v Aprilia World Service BV [2002] EMLR 27
A False statement. Misleading half-truths. Case.
Nottingham Patent Brich & Tile Co v Butler [1886] 16 QBD 778.
A False statement. Change of circumstances. Case.
With v O’Flanagan [1936] Ch. 575
A False statement. Contracts of Utmost good faith. Case.
Atlantic Insurance v Pine Top Insurance [1995] 1 AC 501.
That induced the contract …
- Representation must have been material to the decision to enter into the contract.
- Smith v Chadwick [1884] 9 App. cas. 187 - Representation must have actually been relied upon by the representee.
- Attwood v Small [1838] 6 CL and FCA 232.
- Redgrave v Hurd [1881] 20 Ch. D 1.
The structure of misrepresentation: (4)
1) Distinguish a term of a contract from representation.
2) Identify an actionable misrepresentation.
3) Distinguish between the different types of misrepresentation.
4) Analyse the remedies for misrepresentation.
Three types of misrepresentation:
1) Fraudulent misrepresentation.
2) Innocent misrepresentation.
3) Negligent misrepresentation.
Common law Covers
Fraudulent misrepresentation and Negligent misrepresentation (Hedley Byrne v Heller)
Misrepresentation Act 1967 covers
‘Negligent misrepresentation’ Section 2(1)
Fraudulent misrepresentation
Is when there is an absence of an honest belief that the statement is true. To succeed in deceit, the claimant needs to establish fraud.
Derry v Peek [1889].
Fraudulent misrepresentation: A statement is made:
a) Knowing it is false, or
b) Not believing it is true, or
c) Recklessly - Not caring whether it is true or false.
Where can negligent misrepresentation be covered: Case & Legislation:
- Hedley Byrne v Heller & Partners [1964].
- Section 2(1) of Misrepresentation Act 1967.
Negligent misrepresentation, Hedley Byrne v Heller [1964]
- Action is bought at common law tort whether or not a contractual relationship exists.
- A duty of care arising from a ‘special relationship’ between the parties.
- Maker of the statement possesses knowledge or skill relevant to the subject matter.
- It is likely that the other party will rely on the statement.
Caparo Industries v Dickman [1990]
- The claimant must establish a duty of care, based on sufficient proximity between the parties.
- Which is then breached if the party fails to exercise reasonable care and skill when providing advice.
Negligent Misrepresentation under section 2(1) of the MA 1967
Occurs where a statement is made by one contracting party to another carelessly or without reasonable grounds for believing its truth. No requirement to establish fraud.
Once the represented provided that the statement was in fact false, it is for the maker of the statement to establish that it reasonable believed in the truth off the statement.
The burden of proof is therefore reversed.
Innocent misrepresentation
Used to describe a misrepresentation made entirely without fault where the maker can show that it had reasonable grounds to believe its statement was true.
If this cannot be shown, the misrepresentation may be fraudulent or negligent.
Remedies:
1) Rescission alone
2) Rescission and damages
3) Damages alone.
Rescission alone
Setting aside the contract. Available for all types of misrepresentation unless the right to rescission has been lost.
Rescission and damages
Available for fraudulent and negligent misrepresentation. In innocent misrepresentation the remedy will be either rescission or damages, not both.
Damages alone
Available for all types of misrepresentation, would be awarded when the right to rescission has been lost.
Equitable remedy: Rescission
Purpose: Restore the parties to their pre-contractual position.
There are several bars to the availability of rescission.
Bars to rescission
- Affirmation
- Lapse of time
- Impossibility of rescission
- Accural of third party rights
- S2(2) of the Misrepresentation Act 1967.
Affirmation, Cases:
- Long v Lloyd [1958]: The claimant accepted defendants offer to pay half cost of some of repairs.
- Peyman v Lanjani [1985]: Right to rescind will be lost by affirmation only where the claimant not only knows the facts but is also aware of his right to rescind.
Lapse of time, Case:
Leaf v International Galleries [1950]: Discovered misrepresentation after five years and sought rescission.
Impossibility of rescission, Cases:
- Clarke v Dickson [1858]: The contract between the parties could not be rescinded as the shares were worthless, following the winding up of the company.
- Armstrong v Jackson [1917]: A mere decline in value of shares will not bar rescission.
Third party rights, Case:
Philips v Brooks [1919]: Third party acquires right before representee takes steps to rescind; [mistake as to identity].
