Misrepresentation

Question 1

What are the Four Distinctions of Mental State relevant to liability for the making of False Statements?

Answer 1

Innocent Misrep. — Rational Genuine Belief:

• The Defendant made the False Statement believing it was True on reasonable grounds.

Negligent Misrep. —Irrational Genuine Belief:

• The Defendant made the False Statement believing it was True on unreasonable grounds.

Fraudulent Misrep. — Indifference:

• The Defendant made the False Statement without knowing or caring whether it was True.

Tort of Deceit — Dishonesty:

• The Defendant made the False Statement knowing it was False.

Question 2

What are the Elements of Fraudulent Misrepresentation?

Answer 2

1. The Defendant owed the Claimant a Duty of Care regarding the accuracy of its Statements.
2. The Defendant made a False Statement of Fact.
3. The Defendant made the False Statement without knowing or caring whether it was True.
4. The Defendant made the Statement to induce the Claimant to Contract.
5. The Claimant Reasonably Relied upon the Statement.
6. The Claimant was consequently harmed.

Question 3

What constitutes Inducement?

Answer 3

The playing of a real and substantial part of the Claimant’s decision to contract. Such a role a need not be sole or decisive, only material.

P. 495.

Avon Insurance v Swire Fraser [2000] 1 All ER at [14]-[18].

Question 4

Can a Disclaimer prevent a Claim of Fraudulent Misrepresentation?

Answer 4

No.

§3 – Misrepresentation Act 1967.

Question 5

What constitutes a Correct Statement?

Answer 5

One which is substantially, even if not entirely, true.

With v O’Flanagan [1936] Ch 575, at [579].

Question 6

Can correcting a Misrepresentation Prevent a Claim in Misrepresentation?

Answer 6

Only if the Defendant concretely shows the Claimant discovered the truth before execution. Constructive notice will not suffice.

For more, see the Contract Law for Finance deck.

Redgrave v Hurd [1881] 20 ChD 1, at [181].

Question 7

Can a Disclaimer prevent a Claim of Negligent or Innocent Misrepresentation?

Answer 7

Yes, but only if it satisfies the Reasonableness Test.

This point encompasses Non-Reliance Clauses.

§11(1) – Misrepresentation Act 1967.

Question 8

What is the Reasonableness Test?

Answer 8

An assessment of whether a clause is fair and reasonable in all the circumstances of the case.

§3-§4 — Unfair Contract Terms Act 1977.

Considerations include: (a) bargaining power; (b) notice of the clause; (c) clarity of the clause; (d) availability of information regarding the contract’s subject matter; (e) availability of insurance for the liability sought to be limited; (f) availability of alternative clauses; (g) any other relevant circumstances, such as inclusion in the master agreement.

Question 9

What are the Remedies for Fraudulent Misrepresentation?

Answer 9

• Damages.
• Rescission.

§2(1) – Misrepresentation Act 1967.

Question 10

What is Negligent Misrepresentation?

Answer 10

A false statement of facts by one party, who believed in their truth without reasonable grounds, to another, consequently causing them harm or loss.

§2(2) – Misrepresentation Act 1967.

Question 11

What are the Elements of Neligent Misrepresentation?

Answer 11

1. The Defendant owed the Claimant a duty of care regarding the accuracy of its statements.
2. The Defendant made a false statement of fact.
3. The Defendant made the false statement believing it was true on unreasonable grounds.
4. The Claimant acted in reasonable reliance upon the statement.
5. The Claimant consequently suffered harm.

§2(1) – Misrepresentation Act 1967.

Question 12

How is the Duty of Care in a Claim of Negligent Misstatement distinct?

Answer 12

• The Claimant-Defendant relationship must be of sufficient proximity; and
• It must be fair, just and reasonable to impose a duty of care in the circumstances.

Caparo Industries v Dickman [1990] 2 AC 605, at [29].

Question 13

What is the Standard of Care in a Claim of Negligent Misrepresentation?

Answer 13

The standard of an honest and reasonable person.

Smith v Eric Bush [1990] 1 AC 831, at [26].

Question 14

In Negligent Misstatement, what entails a Relationship of Sufficient Proximity?

Answer 14

An arrangement such that the Claimant’s reliance, by extension its harm, is a foreseeable outcome of the Defendant’s statement.

Examples include professional advisors, commercial counterparties, etc.

Caparo Industries v Dickman [1990] 2 AC 605, at [25].

Question 15

What are the Remedies for Negligent Misrepresentation?

Answer 15

• Damages.
• Rescission.

§2(1) – Misrepresentation Act 1967.

In some cases, rectification may be ordered by the court.

Question 16

What are the Remedies for Negligent Misstatement?

Answer 16

• Damages.
• Rescission.

§2(1) – Misrepresentation Act 1967.

Question 17

What is the Defence of Contributory Negligence?

Answer 17

An argument that leverages the Claimant’s own responsibility for any loss that arose to reduce the damages payable by the Defendant.

§1(1) – Law Reform (Contributory Negligence) Act 1945.

The degree of reduction is left to the Court’s discretion. This defence does not apply to claims of fraud or deceit.

Question 18

What is Innocent Misrepresentation?

Answer 18

A misrepresentation of facts by one party, who honestly believed in their truth with reasonable grounds, to another, consequently causing them harm or loss.

Question 19

What are the Elements of Innocent Misrepresentation?

Answer 19

1. The Defendant owed the Claimant a duty of care regarding the accuracy of its statements.
2. The Defendant made a false statement of fact.
3. The Defendant made the false statement honestly believing it was true on reasonable grounds.
4. The Claimant was induced to contract pursuant to the statement.
5. The Claimant consequently suffered harm.

Question 20

What are the Remedies for Innocent Misrepresentation?

Answer 20

• Damages.
• Rescission.

§2(1) – Misrepresentation Act 1967.

Question 21

Can a Party owe similar Duties in Tort and Contract concurrently?

Answer 21

Yes.

Henderson v Merrett Syndicates [1995] 2 AC 145, at [184]-[194].