misrepresentation

Question 1

define an actionable misrepresentation

Answer 1

An actionable misrepresentation is an untrue statement of fact which induces a person to enter a contract.

Question 2

will false pre-contractual representation automatically lead to an action for misrepresenation?

Answer 2

A false pre-contractual representation will not automatically lead to an action for misrepresentation as there are a number of requirements which must be satisfied.

Question 3

what governs the claims for misrepresentation?

Answer 3

Claims for misrepresentation are governed by both the common law and the Misrepresentation Act 1967 (MA 1967).

Question 4

For misrepresentation there must be

Answer 4

An untrue statement of fact and NOT
Opinion
Forecasts/statements of intention
Trading Puffery: exaggerated praise
Statements of Law
Silence or Non-disclosure
which induces a person to enter a contract.

Question 5

what happens if the party believes an opinion but it is wrong?

Answer 5

An opinion which is genuinely believed by the party making it- cannot be misrepresented even if that opinion is incorrect.

It has to be an uninformed opinion. (Bisset v Wilkinson 1927)

Question 6

Bissett v Wilkinson (1927)

Answer 6

Wilkinson entered into a binding contract to sell to Bisset farmland for ₤13,260.
During negotiations Wilkinson told Bissett that “with a good six horse team, his idea was that the farm would carry 2,000 sheep”.
The land had never been used as a sheep farm before.
After 2 years of unsuccessful farming, Bissett concluded that the land could not support 2,000 sheep, and he brought an action for misrepresentation to cancel the contract and get his money back.

Ruling: The seller’s statement was a matter of opinion.
At the time of the deal, both parties understood that Wilkinson had not used the land for sheep farming, and thus any statement as to the farmland’s capacity would only be an estimate.

Point of Law:
If an untrue statement is an uninformed opinion, it is not an untrue statement of fact.

Question 7

when is it opinion and not misrepresentation?

Answer 7

The statement must not contradict other facts known by the party giving the opinion. (Smith v Land & House Property Corp (1884)

It is more likely to be an opinion if the giver is not better informed than the receiver. (Esso Petroleum Ltd v Mardon (1976)

Question 8

Smith v Land & House Property Corp (1884)

Answer 8

Mr. Smith had advertised his hotel for sale.
They stated that it was let to Mr. Fleck, “ a most desirable tenant”.
Fleck owed rent and had been threatened with court action.
Smith claimed his statement was a matter of opinion.

Ruling:
Held there was a misrepresentation relied on by LHP.

It implied that Smith knew of no reason to claim Fleck was anything other than a desirable tenant.

Point of Law:
The statement must not contradict other facts known by the party giving the opinion.

Question 9

Esso Petroleum Ltd v Mardon (1976)

Answer 9

Mr Mardon was buying a petrol station franchised by Esso Petroleum Co Ltd.
Esso told him they had estimated that the station would sell 200,000 gallons a year.
Mardon signed a three year tenancy.
Sales were less than half.

Ruling:
Held there was a misrepresentation relied on by Mardon.

Esso professed to have a special knowledge or skill inducing Mardon

Point of Law:
It is more likely to be an opinion if the giver is not better informed than the receiver.

Question 10

is a statement of future intention a statement of fact?

Answer 10

A statement of future intention is not generally a statement of fact.

Unless the person has no such intention to perform the action in the future.

Question 11

Edgington v Fitzmaurice (1885)

Answer 11

Edgington lent money to a company on the basis that it would be used for expanding the business.

The directors intended to use the money to pay off some debts.

Ruling:
The directors were liable.

Their statement of intention was in fact a statement of fact.

Point of Law:
A statement of future intention is not generally a statement of fact. Unless the person has no such intention to perform the action in the future.

Question 12

is puffery a statement of fact?

Answer 12

A statement of fact does not include exaggerated advertising or vague boasts.

The court will decide if a reasonable person would take the statement seriously.

Question 13

Dimmock v Hallett (1866)

Answer 13

Some land was being auctioned off.
The advertisement for the auction described the land as having “fertile and improvable land.
It was a poor-quality piece of land.
Dimmock sued on the grounds of misrepresentation.

The Court of Appeal held that the statement about the land being “fertile and improvable” was merely a “flourishing description” and did not entitle the buyer to rescind.

See also ‘Half-truths’

Point of Law:
A statement of fact does not include exaggerated advertising or vague boasts.

Question 14

what happens if there is an untrue statement of law?

Answer 14

In theory no-one can be misled as to what the law is because everyone is presumed to know the law.

However, if the law is misrepresented (incorrectly) it is actionable.

Question 15

Pankhania v Hackney London Borough Council (2002)

Answer 15

The claimants bought a property, part of which was used as a car park.
The council stated that the tenants had 3-months notice.
This was incorrect, as the occupier was a protected business tenant under the Landlord and Tenant Act 1954.

Ruling:
The sellers had incorrectly stated the law as it applied to the occupier of the car park.

There was a remedy for misrepresentation.

Point of Law:
In theory no-one can be misled as to what the law is because everyone is presumed to know the law. However, if the law is misrepresented (incorrectly) it is actionable.

Question 16

is silence or non disclosure allowed?

Answer 16

The general rule is that there is no legal obligation to disclose a material fact known to them, to the other party.

Question 17

‘Caveat Emptor’

Answer 17

let the buyer beware.

Question 18

Fletcher v Krell (1873)

Answer 18

An applicant for a job as a governess failed to disclose the fact that she had previously been married and remained silent on the point.

Ruling:
It was held that there was no misrepresentation.

Point of Law:
There is no legal obligation to disclose a material fact known to them, to the other party.

Question 19

What are exepetions to the silence or non disclosure rule?

Answer 19

There are exceptions to the rule
Representations by conduct
Deliberately concealing defects in goods
Half Truths

Question 20

R v Barnard (1837)

Answer 20

The defendant wore an Oxford Undergrad gown to an Oxford shop so he could qualify for their scheme of getting credit

Ruling: There was misrepresentation.

Point of Law:
You can misrepresent by conduct, even of you stay silent.

Question 21

Gordon v Selico (1986)

Answer 21

Mr Gordon was to purchase a 99-year lease of a flat owned by the defendant, Selico Ltd.

The flat was in poor condition, as was the block that contained it, with some evidence of dry rot.

Prior to the first inspection by the claimants, the defendants had instructed some painters to conceal patches of dry rot from view, by painting them.

Ruling:
It was held by the Court of Appeal that the painting of dry rot to conceal it amounted to a misrepresentation

Point of Law:
You can misrepresent by deliberately concealing defects, even if you stay silent

Question 21

Schneider v Heath (1813)

Answer 21

A ship was sold “to be taken with all faults”. The vendor knew that she was unseaworthy.

The particulars of sale stated that her hull was “nearly as good as when launched”.

In fact, the hull was rotten, and the captain took her to a place where he kept her constantly afloat.

Ruling:
The knowledge of the captain should be imputed to the owner of the ship, and that the contract should be set aside for misrepresentation.

Point of Law:
You can misrepresent by deliberately concealing defects, even if you stay silent

Question 22

Dimmock v Hallett (1866) - again

Answer 22

The farmland for sale was described as having a tenant.
This was true but the tenant had given notice to quit.

Ruling:
The statement was misleading as it was assumed from the statement that they wouldn’t be leaving. It amounted to a misrepresentation

Point of Law:
You can misrepresent by giving a half-truth

Question 22

You only need to show that there is an untrue statement for it to be misrepresention.

true or false

Answer 22

false

Question 23

If the person receiving the information is more informed than the giver, then it is less likely to be misrepresentation

true or false

Answer 23

true

Question 24

You don’t have to tell someone a material fact unless asked.

true or false

Answer 24

true

Question 25

If the person giving the information genuinely believes it to be true, then it cannot be misrepresentation

true or false

Answer 25

false must be an uniformed opinion

Question 26

what are Inducements

Answer 26

The statement of fact must induce the party to enter the contract.

If there are misrepresentations that do not induce the party, then they are irrelevant.

Question 27

Bannerman v White (1861)

Answer 27

Bannerman formed a contract with White, regarding the purchase of hops.
He specifically enquired as to whether the hops had received a sulphur treatment.
Bannerman expressly stated that he would be unwilling to buy the hops if they had been treated.
White assured Bannerman that the hops were untreated.

Ruling: This assurance WAS a condition of contract as the buyer would not have contracted without it

Point of Law: If the untrue statement of fact induces someone into entering the contract, then it is misrepresentation.

Question 28

Challenges with proving inducement.

Answer 28

Where the representee has the opportunity to discover the truth but fails to take it.

Where the representee tests the accuracy but fails to discover truth.

Where the representee asks a third party to test accuracy of statement but fails to discover the truth.

Where there is more than one inducement

Question 29

Redgrave v Hurd (1881)

Answer 29

An elderly partner wanted to sell part of his business.
He gave the prospective purchaser details of the income (£300) and said the figures could be checked from a bundle of documents.
Redgrave didn’t do this.
The income was only £200.

Ruling: The contract was rescinded on grounds of innocent misrepresentation. It was held that relying on the representation was enough and there was no duty to inspect the papers.

Point of Law: If the misrepresentation is not discovered because the opportunity to check it is declined, then the statement is still being relied upon.

Question 30

what happens If the misrepresentation is fraudulent?

Answer 30

If the misrepresentation is fraudulent, it will be actionable (as a matter of policy).

If it is not fraudulent then it is not actionable because the representee will be relying on his own inspection and will be induced by that.

Question 31

Attwood v Small (1838)

Answer 31

The seller of a mine exaggerated claims about the potential.
The purchaser’s appointed their own experts who agreed with the seller.
The accounts had greatly exaggerated the income generated by the estate.
The claimant sought to rescind the contract based on the misrepresentations contained in the reports and accounts.

Ruling: The claimant was unsuccessful. By getting his own experts to check out the reports he had not relied on the accounts but his own judgment.

Point of Law: If the misrepresentation is not discovered after a third party checks the facts, then the statement is not being relied upon

Question 32

Where there is more than one inducement what happens

Answer 32

if the misrepresentation is one of several statements which induced the contract it is still actionable.

Only one false one is needed if you have relied on the untrue statement to some extent.

Question 33

If you have tested the accuracy of the statement and still cannot find the truth, then there is no misrepresentation.

true or false

Answer 33

true

Question 34

If your friend looks at the product and agrees with the vendor on all points, then there is no misrepresentation.

true or false

Answer 34

true

Question 35

If you have four things that you specifically ask about, ALL statements on those four things need to be correct.

true or false

Answer 35

true

Question 36

what do Remedy of Rescission do?

Answer 36

Sets the contract aside and puts the parties back to where they were

Question 37

what happens if theres Damages?

Answer 37

Financial payment to compensate the injured party.

Question 38

Car & Universal Finance v Caldwell (1964)

Answer 38

Mr Caldwell owned a Jaguar. A rogue called Mr Norris convinced him to sell it for a £965 cheque and a £10 deposit.
When he tried to cash the cheque it was dishonoured. Mr Caldwell told the police and the Automobile Association straight away.
Mr Norris sold the car to some dealers, who sold it on, and it was sold on again and again to Car and Universal Finance Ltd.
Had Caldwell validly rescinded before the car was acquired by a bona fide purchaser for value without notice?

Ruling: Mr Caldwell had rescinded the contract as he had taken all the steps he could to demonstrate he didn’t want to be bound by the contract.
Davies LJ noted the old maxim lex non cogit ad impossibilia (the law does not compel the impossible).

Point of Law: You cannot rescind if it is impossible to do so.

Question 39

what are some Misrepresentation - Circumstances when the right to rescind may be lost?

Answer 39

Where innocent party affirms the contract by indicating that they wish to continue and not rescind. If you want to rescind you must STOP using the goods/services.

Where restitution is impossible – e.g. goods could have been consumed, such as eating a cake.

Lapse of time

Question 40

Long v Lloyd (1958)

Answer 40

Lloyd advertised a lorry as being in ‘exceptional condition’. Mr Long went to Mr Lloyd’s premises to see it. Mr Lloyd then said it could do 40mph.
On a trial run from Hampton Court to Sevenoaks, he said it did 11 miles to the gallon. Mr Long bought it for £750.
Two days later, driving to Rochester and back it did only five miles to the gallon as there were many mechanical issues.
Mr Lloyd then said he would repair for half the price. Mr Long accepted.
On another journey, it broke down again. Mr Long sued to rescind.

Ruling: Held that the contract had been affirmed when it was taken back after having been fixed. He emphasised that Mr Long ‘chose’ not to have an expert examine the lorry.

Point of Law: An innocent party affirms the contract by indicating that they wish to continue and not rescind.

Question 41

Leaf v. International Galleries (1950)

Answer 41

Leaf thought he was buying Salisbury Cathedral by John Constable on 8 March 1944 from International Galleries.
International Galleries said it was a Constable. Leaf paid £85.
Five years later when he tried to auction it, Leaf was told that it was not a Constable.
He claimed rescission of the contract against International Galleries, to get back his money.

Ruling: The claim based on misrepresentation was successful however, since it was an innocent misrepresentation, the claimant had lost the right to rescind the contract through lapse of time.
The claim based on mistake was unsuccessful as the mistake related to the quality and did not render the subject matter something essentially different from that which it was believed to be. He believed he was buying a painting and he got a painting.

Point of Law: Rescission may be lost if a sufficient period of time has passed.

Question 42

Categories of Misrepresentation…

Answer 42

Fraudulent misrepresentations

Common Law Negligent mis-statements

Negligent misrepresentations under Misrepresentation Act 1967

Wholly innocent misrepresentations

Question 43

Fraudulent Misrepresentation

Answer 43

‘A false statement made knowingly or without belief in its truth’. (Lord Herschell, Derry v Peek (1889))

The claim for damages is in the tort of deceit.
The claimant can recover all direct loss from relying on the fraudulent misrepresentation regardless of foreseeability.
The remedy is rescission and/or damages.

Question 44

Doyle v Olby (1969)

Answer 44

Mr Herbert Doyle bought a business from Olby (Ironmongers) Ltd.
He was told the business was ‘all over the counter’. In reality, half the shop’s business came via their travelling sales representative, and Mr Doyle sustained heavy losses.
The judge awarded £1500 in deceit, based on two and a half times the cost of employing a part-time rep at £600 p.a., as equivalent to the cost of making good the representation or the reduction in the value of the goodwill.
Mr Doyle appealed.

Ruling: Lord Denning MR increased the damages to £5500. He said Mr Doyle could claim for all damage flowing directly from the deceit, whether or not the defendants could have foreseen such consequential loss.

Point of Law: There is recovery of all direct loss from relying on the fraudulent misrepresentation regardless of foreseeability

Question 45

what is misstatement?

Answer 45

This is a false statement made with no reasonable grounds for believing it to be true.

Hedley Byrne v. Heller (1964) established liability for negligent mis-statement

Provides for recovery of compensation for financial damage through reliance by the claimant on statements made negligently by the defendant

Question 46

Hedley Byrne v. Heller (1964)

Answer 46

Hedley Byrne (HB) had a customer, Easipower Ltd, put in a large order. HB wanted to check their financial position, so asked their bank, National Provincial Bank, to get a report from Easipower’s bank, Heller & Partners Ltd. who replied in a letter that was headed, “without responsibility on the part of this bank”
It said that Easipower was, “considered good for its ordinary business engagements”.
The letter was sent for free.
Easipower went into liquidation, and Hedley Byrne lost £17,000 on contracts.
Hedley Byrne sued Heller & Partners for negligence.

Ruling: The HoL found for Heller because of the exclusion clause, but if it hadn’t been there, it would have found that the relationship between the parties was “sufficiently proximate” as to create a duty of care.
It was reasonable for them to have known that the info that they had given would likely have been relied upon for entering into a contract of some sort.

Point of Law: A false statement made with no reasonable grounds for believing it to be true is negligent mis-statement.

Question 47

Esso Petroleum Ltd v Mardon (1976)

Answer 47

Mr Mardon was buying a petrol station franchised by Esso Petroleum Co Ltd.
Esso told him they had estimated that the station would sell 200,000 gallons a year.
Mardon signed a three-year tenancy.
Sales were less than half.

Ruling:
Held there was a misrepresentation relied on by Mardon.

Esso professed to have a special knowledge or skill inducing Mardon

Point of Law:
A false statement made with no reasonable grounds for believing it to be true is misrepresentation.

Question 48

Misrepresentation Act 1967

Answer 48

Introduced negligent misrepresentation

Enacts the category of wholly innocent misrepresentation.

Supercedes the common law remedy of fraudulent misrepresentation

Question 49

Two main reasons for use of Misrepresentation Act 1967

The burden of proof is reversed (the defendant must prove that he had reasonable grounds for believing his statement)

The remedies are rescission and/or damages. The person who made the representation will be liable to the same remedies as if they were fraudulent.

Question 50

Royscot v Rogerson (1991)

Answer 50

Rogerson acquired a used car from Maidenhead Honda Centre Ltd on hire purchase. The car was priced at £7600, Rogerson paying a £1200 deposit. (15%) The balance came from a finance company, Royscot Trust.
The dealer filled in the application forms, falsely misrepresenting that the total cost was £8,000 and the deposit was £1600 (20% of the total). Royscot approved the loan; but, had accurate figures been stated, they would have refused finance since its policy was not to lend money if the deposit was less than 20%.
Rogerson began paying instalments, but in due course had cashflow difficulties and stopped paying and sold the car even though he hadn’t paid for it. A loss to Royscot.
Royscot sued the car dealer in damages, alleging that they had relied upon the dealer’s misrepresentation, which induced them into the finance plan. Royscot claimed that had the dealer given the correct figures, they would have refused finance, and that the loss was the dealer’s fault.

Ruling: The car dealer was liable for all the consequences of his misrepresentation, and therefore had to pay the losses incurred by Royscot Trust Ltd.
Rogerson’s wrongful sale of the car was foreseeable and not a break in the chain of causation.

No need to show a special relationship – the burden of proof is on the person making the misrepresentation.

The damages can be more than just the loss incurred.

Essentially the same as fraudulent misrepresentation

Point of Law: the burden of proof is on the person that made the misrepresentation, and the damages may be more because under the tort of negligence liability is limited to reasonably foreseeable loss.

Question 51

what is wholly innocent misrepresentation?

Answer 51

This is a ‘false statement made by a person who at the time had reasonable grounds for believing it to be true’

At common law, the remedy for innocent misrepresentation was rescission ONLY.

Under the Act, recession is still available, BUT court’s now have the discretion to award damages in lieu of rescission.

Question 52

William Sindall Plc v Cambridgeshire CC (1994)

Answer 52

Sindall agreed to buy land from Cambridgeshire CC after they were told the council were aware of no easements.
But a private sewer from 20 years before was found after completion.
William Sindall plc sued for rescission for misrepresentation and common mistake.
For mistake, it was held that the contract allocated risk of unknown sewers to the buyer.

Ruling:
Held, the seller had not made any misrepresentation. They had truthfully disclosed all rights and liabilities that they were aware of, making clear that the disclosure only included those rights and liabilities they were aware of. However, it set the precedent that damages would have been awarded in lieu of rescission under the Misrepresentation Act 1967 s.2(2), had there been misrepresentation.

Point of Law: If there is innocent misrepresentation the contract is still voidable

Question 53

Unfair Contract Terms Act 1977.

Answer 53

It states that for the misrepresentor to exclude liability for the mis- statement he must show the clause satisfies the test of reasonableness (mis-representation is averted).

This applies for all contracts and not just business contracts.

Question 54

The two remedies for misrepresentation are rescission and damages?

true or false

Answer 54

true

Question 54

Hedley Byrne v Heller tested wholly innocent misrepresentation?

Answer 54

false it was William Sindall Plc v Cambridgeshire CC (1994)

Question 55

Under Wholly Innocent Misrep you may still have to rescind even if you had no way of knowing the statement you were giving was false?

true or false

Answer 55

true

Question 56

Fraudulent misrepresentation is rarely used now.

true or false

Answer 56

true