Misrepresentation

Question 1

What is it

Answer 1

A misrepresentation occurs where where one party utters an incorrect statement and it makes its way into the contract

Question 2

Remedy for a condition

Answer 2

Rescind or sue for damages or affirm the contract and still sue for damages

Question 3

Remedy for a warranty

Answer 3

Damages only

Question 4

Remedy for Innominate term

Answer 4

Depends on the seriousness of the breach

Question 5

Remedies available under

Answer 5

Contract Law, tort law and the sale of goods and supply of services act

Question 6

The statement (1)

Answer 6

The false statement must have induced the other party to contract - Colthurst v Colthurst

Question 7

The statement Quote

Answer 7

‘The court has to consider what a reasonable person would have understood from the words used in the context in which they were used … may depend on the nature and content of the statement, the context in which it was made, the characteristics of the maker of the statement, of the person to whom it was made’

Question 8

The Statement (2)

Answer 8

The statement must be made with the intention of inducing the misrepresentee. 1. P must establish that the representation was made by D with the intention of inducing P 2. P must prove that they did in fact rely on the representation

Question 9

Edgington v Fitzmorris

Answer 9

Issue: Statement of intention v statement of fact
Application: Directors of a company encouraged debentures (Financial instrument that companies use to raise funds ). Stated their intention was to raise money to purchase goods to help develop the company. The money was actually used to pay off other liabilities. D claimed it was a statement of intention and as they didn’t carry out the intention the should not be liable.
Decision: D stating a fact which was not true, and if they knew that it was not true, or made it recklessly not caring whether it was true or not then they would be liable. There may be inherent in a promise an implied
statement as to a fact, and where this is really the case, the
court can attach appropriate consequences to any falsity in, or recklessness in the making of that statement. However . Proving that a stated intention does not come to fruition (begin to happen) is not conclusive evidence that this intention was not honestly held previously and that misrepresentation
occurred.

Question 10

Quote about state of mind - Edgington v Fitzmorris

Answer 10

‘It is true that it is very difficult to prove what the state of a man’s mind at a particular time is, but if it can be ascertained it is as much a fact as anything else. A misrepresentation as to the state of a mans mind is therefore a statement of fact’.

Question 11

Statement of Opinion

Answer 11

There is an implied representation that the opinion is honestly held.

Question 11

Esso v Marden

Answer 11

Issue: Statement - agent - negligient
Application: Esso’s agent, with 40 years experience, stated that a new filling station would sell 200,000 gallons by year 3. only sold 78,000 in the first 15 months and closed. Esso held liable, agent was in the best position estimate and had all relevant knowledge.
Decision: Agent was negligient in making the statement - ‘… if such a person makes a forecast, intending that the other
should act upon it – and he does act upon it, it can well be
interpreted as a warranty that the forecast is sound and
reliable in the sense that they made it with reasonable care
and skill … If the forecast turns out to be an unsound forecast
such as no person of skill or experience should have made,
there is a breach of warranty.’

Question 11

Sales puff

Answer 11

Not a statement of fact

Question 11

Statements made by an agent

Answer 11

D is only liable for statements made by their agent which are within the real or apparent authority of the agent

Question 12

Statement must be untrue

Answer 12

Is D intended to lie and the statement was in fact true there is no misrepresentation

Question 13

Objective assessment

Answer 13

If it is ambiguous, then the meaning is that which the maker should know that the
receiver would put on it.

Question 14

If statement is mostly true????

Answer 14

If the difference between facts represented and facts that existed would have reasonably influenced the mind of a normal representee, in considering whether to alter his position as he did, the representation is false. If the statement is partially true, and the
representor remains silent as to the full truth of the matter, it may amount to a
misrepresentation.

Question 15

Statement must be relied upon

Answer 15

The misrepresentation must be made with the intention and the result of inducing the other party into the contract - P must have relied upon the misrepresentation such that but for it they would not have entered into the contract or at least not under the same terms.

Question 16

Will be actionable if the statement was only one of the reasons P entered the contract

Answer 16

Need not be the sole or underlying cause provided it is one of the underlying causes
‘It is not necessary to show that the misstatement was the sole cause of [the plaintiff] acting as he did. If he acted on that misstatement, though he was also influenced by an erroneous supposition, the defendants will still be liable.’ - Edgington v Fitzmorris

Question 17

Non actionable misrepresentations

Answer 17

• If P never knew of its existence
• If P did not allow it to effect their decision to contract
• If P was aware of the truth

Misrepresentation is not actionable is these instances and remedies are not available

Knowledge means actual and not constructive, so saying that they should have excercised due dilligence to learn the truth is no defence

Question 18

Correcting misrepresentations

Answer 18

Misrepresentor must show that at the time of contractin te misrepresentation was clearly brought to the attention of the misrepresentee

Question 19

Fraudulent misrepresentations established:

Answer 19

Misrepresentation as to:
1. A past or existing fact
2. Was made knowingly or without belief to its truth, or reckless as to whether it was true or false
3. Was intended by D that the representation should be acted upon by P
4. P did act on the representation
5. P suffered damages as a result

Question 20

Fraudulent misrepresentation: Burden of proof

Answer 20

• ‘The onus is and remains on a plaintiff to prove the
  defendant’s dishonesty, that is, his lack of honest
  belief in the truth of the statement. It is not for a
  defendant to prove his honest belief.
• Motive is irrelevant

Question 21

Cabin v Sommerville

Answer 21

Issue: Fraudulent misrepresentations
Application: Seller stated that the house was dry and free of damp. In had in fact been re-wallpapered several times in the preceding ears to cover damp patches. Once even several weeks before stating that the house was damp and dry. Seller knowingly made this fraudulent misrepresentation and was liable.

Question 22

Fraudulent Misrepresentation: Remedies

Answer 22

Recision and Damages
Damages = what was reasonably spent as a result of the fraud

Question 23

Negligient misrepresentation: classes

Answer 23

1. Neg misrep of existing facts made to induce the other party to contract. No duty of care needed
2. Tort of neg misrep. No need to prove the other party was induced to contract. A duty of care must exist
3. Sec 45 Sale of Goods and Supply of Services act 1980

Question 24

Negligent Misrepresentation Quote

Answer 24

‘A party seeking damages for negligent misrepresentation must establish that the representative failed to exercise due care in making the representation as a result of
which representation the person to whom it was made was induced to enter into the
particular agreement and suffered damage in consequence of the inaccurate
representation.’ [Forshall v Walsh]
Negligent misrepresentation

Question 25

Hedley Byrne v Heller

Answer 25

Issue Negligent Misrepresentation - Tort
Application: Bank negligently misrepresented a company to be a sound financial footing. Appellant invested in the company which later collapsed. House of Lords held that where a special relationship exists a duty of care will arise between the parties

Question 26

Specific performance remedy

Answer 26

Abatement of the purchase price

Question 27

Damages under 1990 act

Answer 27

Statutory right to damages where a pre-contractual statement is a misrepresentation - overrules the previous rule at common law that damages were unavailable for innocent misrepresentation

Question 28

Sec 45.

Answer 28

If the person making the misrepresentation would be liable to damages in respect thereof had the misrepresentation been made fraudulently, that person shall be so liable …… unless he proves that he had reasonable grounds to believe and did believe up to the time that the contract was made that the facts represented were true

Question 29

Onus for misrepresentation

Answer 29

Once P proves that the misrepresentation has occurred then the onus is on the misrepresentor to prove this defence

Question 30

Defence of the Misrepresentor

Answer 30

1. Believed and had reasonable grounds for believing the truth of the statement

Question 31

Howard Marine v Ogden

Answer 31

Issue: defence of the representor
Application: P hired barges to D and stated that their capacity 1600 tones. The figure was based on their recollection of a registry which was viewed within the industry as ‘the bible’. D did not consult the ships documents to verify the capacity. The registry was innaccurate.
Held: unreasonable for D not to consult the ships dcuments to verify capacity

Question 32

Quote about the act

Answer 32

• The “Act imposes an absolute obligation not to
  state facts which the representor cannot prove he
  had reasonable ground to belief.”

Question 33

What is the point of section 45 Liability

Answer 33

1. supplement the limited remedies otherwise available
2. Additional protection of the misrepresentee
3. It also allows one to affirm a contract (despite the
   presence of a misrepresentation), and also claim damages.

Question 34

Damages

Answer 34

Usually put P in the same position as if the contract had been performed

Question 35

Consequential losses

Answer 35

Recoverable if you can prove a causal link between the misrepresentation and the losses

Question 36

Compensation

Answer 36

Parties return back to their pre-contractual position

Question 37

Innocent misrepresentation: Remedies

Answer 37

under common law no right to damages for wholly innocent misrepresentations
Recission is available

Question 38

Need to differentiate between Fraudulent and innocent misrepresentation as:

Answer 38

• Bars to recission are less strict for fraud
• the court can refuse recission and grant damages only if there is no fraud

Question 39

If damages are granted in liue of (instead of) rescission they are calculated on the basis of:

Answer 39

• The cost of remedying the defect or;
• The reduced market value of the good as a result of the
  defect.

Question 40

Three methods of excluding liability

Answer 40

1. Common law rules relating to exemption clauses
2. Consumer protection law
3. Specific performance under section 461980 Act

Question 41

Excluding Liability: Common Law

Answer 41

• Cannot exclude liability for fraudulent misrepresentations
• Allowable for Innocent and Negligable
• Including a disclaimer in a contract that the estimate
  of the size of the plot of land for sale may be
  inaccurate will avoid liability for negligent/innocent
  misrepresentation

Question 42

Excluding Liability sec 46

Answer 42

• Under this section the exclusionary clause must be fair and reasonable
• Only applies to contracts which fall under the act
• • Things considered:
• The power imbalance between parties.
• Could the consumer enter the contract without
  the clause.
• Was the consumer aware of the clause

Question 43

Silence as Misrepresentation

Answer 43

Generally no duty to disclose so silence is not a misrepresentation

“However, in certain circumstances, such a party might be
under a duty to disclose such facts. A duty of disclosure
will arise, for example, where silence would distort a
positive representation that has been made, or where
material facts come to the notice of the party which falsify
a representation previously made.’

Question 44

Subsequent untruths

Answer 44

where a true statement is made which after negotiations becomes untrue, or is discovered to be untrue, this change in state must be disclosed

Question 44

Three main areas where silence may be treated as a misrepresentation

Answer 44

1. Contracts involving upmost good faith
2. Contracts where silence has distorted a positively made representation
3. Where a fiduciary relationship exists

Question 45

Spice girls v Aprilla

Answer 45

Issue: Subsequent untruths
Application: P gave indorsement rights to D who intended to put a spice girls logo on Aprilla scooters. The logo was the word spice which was spelled using an image of each band member. Geri Halliwell intended to leave the group and P knew. This was not disclosed to D. D expected all 5 members to be a part of the photoshoot for the advertising campaign. there was no reason to believe the line up would change. There was nothing done by P to amend the representation that that all 5 members would participate.
Held: P was under a duty to correct this representation

Question 46

Duty to disclose test

Answer 46

• In Ireland, the test is an objective one.
• The English approach adds a subjective dimension:
• Did the non-disclosure actually induce the
  insurer?