Misrepresentation

Question 1

What are vitiating factors?

Answer 1

• Factors that affect the validity of the contract
• If present, the contract will either be rendered void or voidable

Question 2

What does it mean if a contract is voidable?

Answer 2

• If a contract is voidable, the affected party can elect to rescind the contract, subject to certain bars (economic duress, undue influence, misrepresentation and mistake)

Question 3

What does it mean if a contract is rendered void?

Answer 3

• If a contract is void, the parties will be treated as if they had never made a contract (mistake, illegality)

Question 4

What are the 3 classifications of pre-contractual statements?

Answer 4

1. So important that they become terms of the contract (if the statement is untrue the remedy will be breach of contract
2. Mere puff and therefore no legal consequences (For ex. “Redbull gives you wings)
3. Representations (if the statement is un true, the remedy will be misrepresentation)

Question 5

What is an operative misrepresentation?

Answer 5

• An unambiguous false statement of past or existing fact, made by one party to the contract to the other, before or at the time of contracting, on which the other party has relied in contracting

Question 6

What are the 2 remedies for an operative misrepresentation?

Answer 6

1. Rescission (setting aside the contract and restoring the parties to their pre-contractual position | available for all types of MR)
2. Damages (the role of damages is to put the party back onto the position they would have been in had the misrepresentation never been made | calculation depends on the type of MR)

Question 7

What is the difference between damages awarded in breach of contract and tort?

Answer 7

• Breach aims to fast forward the injured into the position they would have been if the contract was successful
• Tort aims to rewind parties to their pre-contractual positions

Question 8

What are the two key components for establishing an operative misrepresentation?

Answer 8

1. False statement
2. Reliance on the statement

Question 9

What forms can a false statement of past or existing fact be in?

Answer 9

• Verbal
• Written statement
• A physical action
• An omission

Question 10

What are the four types of a false statement of past of existing fact?

Answer 10

• Statment of intention (if the state of mind in the moment is contradictory)
• Statement of opinion (if they are an expert and should know better)
• Silence (partial-disclosure and change of circumstances)
• Conduct

Question 11

Can a statement of future intention constitute misrepresentation?

Answer 11

• No because the representor might change their mind or be unable to fulfil the intention however, if at the time you do not hold that intention then it can constitute misrepresentation because you are misrepresenting the state of your mind

Question 12

Edgington v Fitzmaurice (1885)

Answer 12

• The directors of a company wanted people to invest in their company by posting prospectors.
• In the prospectors it was said that the money would be used to repair building and buy horses for deliveries
• Their real intention was to pay off their debt
• The court ruled that it was a misrepresentation because they lied

Question 13

Does a statement of opinion constitute misrepresentation ?

Answer 13

• No, however if the representor is an expert in the are and was in a position to know the truth then it can be viewed as a fact

Question 14

Bissett v Wilkinson (1927)

Answer 14

• Mr.Bissett was selling land and Mr.Wilkinson was interested in purchasing it
• Mr.Bissett told Mr.Wilkinson that the land would support 200 sheep
• Mr.Wilkinson relied on the statement and bought the land
• The court ruled that this was not a misrepresentation because it was only a statement of opinion
• Mr.Wilkinson could not have known it would support 200 sheep because the land had never been used as a sheep farm

Question 15

Smith v Land & House Prop Corp (1884)

Answer 15

• Smith owned a hotel and advertised it for sale
• He stated that it was being let by a desirable tenant
• The tenant was in fact not paying rent
• Smith tried to argue he was giving his opinion of him, however he knew that was not the truth
• The court ruled against

Question 16

Esso Petroleum Co Ltd v Mardon (1976)

Answer 16

• Esso found a site to build a station on
• Their expert (Mr.Leap) estimated they would sell roughly 200,000 gallons
• Esso bought the land and started to build
• The local authority stopped them because it needed to be build facing away from the road (this impacted the amount of petrol that Esso would sell due to the access being difficult)
• Esso built the station and leased it to Mr.Mardon
• When discussing the lease Mr. Mardon said he would sell roughly 200,000 gallons
• Over time, the petrol sold did not hit the mark
• Mr. Mardon fell into debt
• The court held that it was a false statement of the fact

Question 17

Can silence constitute a misrepresentation?

Answer 17

• Complete silence cannot constitute a misrepresentation
• However, partial disclosure can (if you say something that is true but fail to disclose facts that mislead someone)

Question 18

Turner v Green (1895)

Answer 18

• Turner agreed to settle a legal dispute with Green. Green, at the time, knew that a court judgment in the dispute had been decided in
  Turner’s favor but did not disclose this information to Turner.
• Turner, unaware of the judgment, accepted the settlement offer under the assumption that the dispute was still unresolved.
• The court held that mere silence does not constitute misrepresentation or fraud unless there is a duty to disclose the information.

Question 19

Notts Patent Brick & Tile Co v Butler (1886)

Answer 19

• Butler wanted to sell land that was subjected to restricted covenants
• One of the restrictions was that the land could not be used as a brick yard
• The plantiff were brick makers and wanted to buy the land to make bricks
• The plantiffs asked if the land had was subjected to restrictions
• The solicitor say they were not aware of any restrictions (this was technically true, but he failed to mention he did not check)
• The failure to qualify the statement turns into a misrepresentation

Question 20

Dimmock v Hallet (1866)

Answer 20

• Dimmock was purchasing land from Hallett
• Hallett represented that the land was let to tenants, implying a steady source of rental income.
• However, he failed to disclose that the tenants had given notice to terminate their tenancies, which would leave the land unoccupied shortly after the sale.
• Hallet was telling a half-truth
• The contract was voidable at the option of Dimmock, and he was entitled to rescind it.

Question 21

With v O’Flanagan (1936)

Answer 21

• Dr. O’Flanagan was a medical practitioner who was selling his medical practice.
• In January 1934, he represented to Mr. With that the practice generated an annual income of £2,000.
• However, by the time the contract was finalized in May 1934, the income of the practice had significantly decreased because Dr. O’Flanagan had fallen ill and was unable to work effectively.
• Dr. O’Flanagan did not disclose the change in circumstances to Mr. With.
• The Court of Appeal ruled in favor of Mr. With because Dr.O’Flanagan had a duty to disclose the change of circumstances to With

Question 22

Spice Girls v Aprilia (2002)

Answer 22

• The spice girls entered into a contract with Aprilia as a 5 girl band
• They agreed to promote Aprila’s scooters and in return Aprilia agreed to sponsor their international tour
• 2 weeks after the girls singed a contract a member left (they were aware the girl was leaving prior)
• The photos from the photoshoot were now not useable
• The court ruled in favor of Aprilia because by continuing the conduct of representing themselves as a 5 girl band when they knew someone was leaving was a misrpresentation

Question 23

Avon Insurance plc v Swire Fraser Ltd (2000)

Question 24

Smith v Chadwick (1884)

Answer 24

• Company prospectus listed Mr Grieve as a Director
• Claimant brought shares in reliance on the prospectus but admitted the information regarding Mr Grieve did not affect their decision
• The court held that the false statement played no part in the decision to contract

Question 25

Attwood v Small (1832)

Answer 25

• In the course of negotiations Small told Attwood exaggerated and untrue statements regarding mines
• Attwood decided to get their own expert to access the mines
• The expert came to the same conclusion as Small
• Attwood bought the mines and discovered it did not produce as much as it was represented to
• The court ruled that although their was misrepresentation it was not operative because Attwood relied on the statement from their own experts (the statements from Small did not induce Attwood into the contract)

Question 26

Redgrave v Hurd (1881)

Answer 26

• Hurd (a solicitor) was selling his practice and exaggerated how much the practice earned per year
• Hurd asked Redgrave if he wanted to look at the accounts but Redgrave declined
• The court held that this was misrepresentation because an opportunity to discover the truth does not negate the misrepresentation

Question 27

What are the 4 types of misrpresentation?

Answer 27

1. Fraudulent misrepresentation
2. Negligent misrepresentation (common law)
3. Negligent misrepresentation (statute)
4. Innocent misrepresentation

Question 28

What is the remedy for Fraudulent Misrepresentation?

Answer 28

• Rescission plus damages based on the tort of deceit

Question 29

What is the remedy for Negligent Misrepresentation (common law)?

Answer 29

• Rescission plus damages based on the tort of negligent misstatement

Question 30

What is the remedy for Negligent Misrepresentation (statute)?

Answer 30

• Rescission plus damages based on the Misrepresentation Act 1967

Question 31

What is the remedy for Innocent Misrepresentation?

Answer 31

• Strictly rescission only
• BUT section 2(2) Misrepresentation Act 1967 provides an exception

Question 32

What is Fraudulent Misrepresentation?

Answer 32

• Fraud is proved when it is shown that a false misrepresentation has been made, (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false
• Can be used to get around a limitation on liability clause
• Focus is on the state of the mind of the representer (did they intend to mislead?)

Question 33

Derry v Peek (1889)

Answer 33

• Derry (the director of a company) issued a prospectus stating they had the right to use steam power instead of horse-drawn trams which would make the business more profitable
• The company needed government approval to use the steam power which was later denied
• Peek bought shares in the company and later lose their money when the company failed
• The court held that the directors were not liable for fraud because they honestly believed the statement was true at the time.
• The false statement was made without fraudulent inten, it was merely a mistake

Question 34

Who bears the burden of proof in fraudulent misrepresentation?

Answer 34

• The burden of proof is on the representee to show the representor lacked belief in the truth of what was said
• Difficult to discharge in practice

Question 35

BSkyB v HP Enterprise Services (2010)

Answer 35

• Complicated decision (took 18 months to produce a 500 page decision)
• BskyB wanted to introduce new and improved call centres to manage their customers.
• The contract for delivering the call centres was with EDS. - The contract was worth 50 million.
• EDS lied about how long it would take to deliver the contract in order to get the contract.
• They knew it was impossible to complete in the time frame.
• The contract contained a limitation of liability clause meaning the liability of EDS was limited to 30 million.
• As a matter of public policy you cannot exclude fraudulent misrepresentation. - The court approved the definition of Derry and Peek.
• The court said the burden of proof was discharged, they awarded 200 million.

Question 36

Akerhielm v de Mare (1959)

Answer 36

• Akerhielm agreed to sell shares to De Mare, but the completion of the sale was contingent on certain regulatory approvals that were required in Sweden, the country where the transaction was taking place.
• Despite efforts, the regulatory approvals could not be obtained, and the sale could not proceed as planned. - The Privy Council held that the failure to obtain regulatory approval frustrated the contract In this case, the inability to complete the sale due to regulatory barriers was not the fault of either party, and it rendered the contract unenforceable.

Question 37

Jewson & Sons v Arcos (1933)

Answer 37

• Jewson & Sons agreed to purchase a quantity of timber from Arcos Ltd.
• The timber was described in the contract as being of a specific size: “half an inch thick.”
• When the timber was delivered, it did not conform exactly to the specified size.
• Some planks were slightly thicker or thinner than the agreed measurement.
• Jewson & Sons rejected the goods, claiming that they were entitled to do so under the Sale of Goods Act because the goods did not conform to the description.
• The court held that Jewson & Sons were entitled to reject the goods because they did not conform to the description

Question 38

What are the 2 remedies for Fraudulent Misrepresentation?

Answer 38

1. Rescission (subject to any bars to rescission applying)
2. Damages (calculated on the basis of expectation

Question 39

What are the two ways Fraudulent Misrepresentation Damages are Calculated?

Answer 39

1. Not limited in terms of foreseeability and remoteness (very generous)
2. Representee can claim for lost opportunities (can claim for loss opportunities)

• Damages are calculated on the basis of the tort of deceit (Tortious because the misrepresentation falls outside the contract and puts the claimant back into the position they were in before the statements were made)
• Not limited in terms of remoteness and foreseeability

Question 40

How are Tortious damages calculated?

Answer 40

• Damages are based on reliance loss (putting the claimant back into the position they would have been in had the misrepresentation never been made)

Question 41

How are Contractual Damages calculated?

Answer 41

• Based on expectation loss (fast forwarding the parties into position they would have been had the breach not occurred

Question 42

Doyle v Olby (1969)

Answer 42

• Doyle purchased a business from Olby Ltd based on fraudulent misrepresentations.
• The seller, Olby, falsely stated the profitability and nature of the business.
• Doyle suffered significant financial losses after discovering that the business was not as represented.
• Doyle was awarded damages for all his losses, including those that were unforeseeable but directly resulted from the fraudulent misrepresentation by Olby.

Question 43

Smith New Court Securities Ltd (1996)

Answer 43

• Smith New Court Securities Ltd purchased shares in Ferranti International plc from Scrimgeour Vickers (the defendant), acting on behalf of an undisclosed principal.
• The defendant misrepresented the circumstances of the sale, falsely stating there was a competing bidder for the shares.
• Relying on this misrepresentation, Smith New Court bought the shares at an inflated price of £23.1 million.
• Later, it was revealed that Ferranti was involved in a significant fraud, which caused the value of the shares to plummet.
• Smith New Court ultimately sold the shares for only £11.8 million.
• Smith New Court was awarded damages of £11.3 million, representing the difference between the purchase price and the resale price of the shares, plus other consequential losses directly caused by the fraud.

Question 44

East v Maurer (1991)

Answer 44

• Mr. Maurer, the defendant, owned two hairdressing salons.
• He sold one salon to the claimants, Mr. and Mrs. East, fraudulently misrepresenting that he would not work in the second salon.
• The claimants purchased the salon for £20,000, relying on Maurer’s assurance that he would not operate the competing salon.
• Contrary to his representation, Maurer continued to work in the second salon, drawing customers away from the claimants’ business.
• The claimants’ salon failed to generate the expected profits due to this competition, and they eventually sold it at a loss.
• The claimants were awarded damages of £10,000 (This amount included compensation for their actual financial losses and the lost opportunity to profit from the business.)

Question 45

4 Eng Ltd v Harper (2008)

Answer 45

• 4 Eng Ltd (the claimant) was a company that purchased shares in another company from Harper (the defendant).
• Harper, a director of the company being sold, made false representations about the company’s financial performance and the health of its business.
• 4 Eng Ltd relied on these misrepresentations when deciding to purchase the shares for £300,000.
• After the acquisition, 4 Eng Ltd discovered that the financial situation of the company was far worse than Harper had represented, and the true value of the shares was substantially lower.
• Eng Ltd was awarded damages based on the difference between the price paid for the shares (£300,000) and their actual value at the time of purchase and additional consequential losses directly caused by Harper’s fraudulent misrepresentation.

Question 46

What is Negligent Misrepresentation?

Answer 46

• Where the representor believed in the truth of the statement but they were negligent in forming that belief
• Cannot be used if there is a relationship between the parties

Question 47

Who bears the burden of proof in Negligent Misrepresentation (Common Law)

Answer 47

• On the representee to prove that the representation was made negligently

Question 48

What tort is Negligent Misrepresentation (Common Law) based on?

Answer 48

• Tort of negligent misstatement

Question 49

What is the additional requirement of Negligent Misrepresentation (Common Law)?

Answer 49

• The representee must also show that the representor owed them a duty of care (that there was a ‘special relationship’ between the parties)

Question 50

How can the claimant prove the ‘speacial relationship’ element in Negligent Misrepresentation (common law)?

Answer 50

• The defendant must arguably either have or profess to have some special skill in relation to the subject matter or must have taken it upon himself to make representations
• It must have been reasonable for a claimant to rely upon the defendant’s statement
• Defendant must either know that the claimant will rely on the statement, or it must be reasonably foreseeable that he will rely on it

Question 51

Hedley Byrne & Co v Heller & Partners Ltd (1964)

Answer 51

• Hedley Byrne (the claimant) was an advertising agency.
• Heller & Partners (the defendant) was a bank.
• Hedley Byrne was considering extending credit to a client, Easipower Ltd, for advertising services.
• Before doing so, Hedley Byrne asked Heller, Easipower’s bank, to provide a credit reference to assess Easipower’s financial stability.
• Heller gave a positive reference, stating that Easipower was “considered good for its ordinary business engagements.”
• However, this reference included a disclaimer of responsibility: “without responsibility on the part of this bank.”
• Relying on Heller’s statement, Hedley Byrne extended credit to Easipower.
• Easipower went bankrupt, and Hedley Byrne suffered financial losses.
• Heller was not liable for Hedley Byrne’s financial losses because the disclaimer absolved Heller of any duty of care.
• However, the case established a general principle of liability for negligent misstatements under certain conditions.

Question 52

What are the remedies for Negligent Misrepresentation (Common Law)?

Answer 52

1. Rescission (subject to any bars to rescission applying)
2. Damages (calculated on the basis of the tort of negligent misstatement)

• Normal tortious rules of foreseeability and remoteness will apply (less generous than fraudulent misrepresentation)

Question 53

What is Negligent Misrepresentation (statute)?

Answer 53

• Misrepresentation Act 1967
• Under s 2(1) the representee has only to establish that they entered into a contract in reliance upon a misrepresentation made by the other party to the contract, and that they suffered loss as a result

Question 54

Who bears the burden of proof for Negligent Misrepresentation (statute)?

Answer 54

• The representor must prove that they had reasonable ground to believe in the truth of their statement
• If the representor cannot establish the reasonableness of their belief, they will be liable in damages
• Advantage of this different approach is demonstrated in Howard Marine v Ogden (1978)

Question 55

Howard Marine v Ogden (1978)

Answer 55

• During negotiations Howard Marine told Ogden that the carrying capacity of their barges was 1600 tons
• This statement was based on HM’s memory of the Lloyd’s register, which was actually incorrect (the correct figure could have easily been found in the barge’s documents
• Ogden brought an action under the misrepresentation act and in tort under negligence statement.
• His claim under the misrepresentation was successful.
• The court ruled the statement was based on memory, while the truth was in front of them and they should have checked them.
• The court did not agree with the negligence statement because their was not duty of care.

Question 56

What are the remedies for Negligent Misrepresentation (statute)?

Answer 56

1. Rescission (subject to any bars to rescission applying)
2. Damages calculated on the tort of deceit (the ‘fiction of fraud’ calculated in the same way as fraudulent misrepresentation)
   - Very generous)
   - Not limited in terms of remoteness and foreseeability
   - Representee can claim for opportunity lost

Question 57

What is the problem with the statute for Negligent Misrepresentation in regard to damages?

Answer 57

• Silent on the measure of damages to be awarded and how to calculate them
• But the ‘fiction fraud’ s 2(1) states “if the person making the representation would be liable to damages in respect thereof had the misrepresentation been made fraudulently, that person shall be so liable, notwithstanding that the misrepresentation” was not made fraudulently

Question 58

Naughton v O’ Callaghan (1990)

Answer 58

• Naughton bought a race horse for £27,300
• Horse raced but never won (value dropped to £1,500)
• Naughton discovered that misrepresentations had been made about the horse’s pedigree (it had actually been worth only £23,500)
• The court held that in relation to misrepresentation claim Naughton could claim for all the losses that flowed from the misrepresentation including the difference between the price paid and the diminished value £25,800 and training fees £9,820

Question 59

Royscott v Rogerson (1991)

Answer 59

• Royscott Trust Ltd entered into a hire-purchase agreement with Rogerson (a car dealership) to finance the purchase of a vehicle by a customer.
• Rogerson provided false information about the customer’s financial situation and the purchase price of the car.
• The misrepresentation induced Royscott to agree to the hire-purchase arrangement.
• The customer defaulted on payments, and the car’s resale value was far less than the financing provided.
• Royscott suffered a financial loss due to the misrepresentation.
• Looked directly at what parliament intended by s2(1) of the Act
• Court of Appeal said that damages under s2(1) of the 1967 Act should be assessed in the same way as damages for fraudulent misrepresentation, even though the misrepresentation might not be fraudulent
• Court refused to limit recovery of damages by notions of foreseeability and remoteness
• This decision seems to treat misrepresentation made negligently with exactly the same contempt as those mad fraudulently

Question 60

What is Innocent Misrepresentation?

Answer 60

• The representor believed the truth of what they were saying and were careful in forming that belief
• Use to cover all non-fraudulent misrepresentations before the development of negligent misstatement in tort
• The innocent party must take steps to avoid contract (taking reasonable steps to make rescission known is sufficient)

Question 61

What is the remedy for Innocent Misrepresentation?

Answer 61

• Rescission ONLY
• No damages remedy
• S2(2) of Misrepresentation Act 1967 allows court to prevent rescission for non-fraudulent misrepresentation and award damages (known as statutory bar to rescission)

Question 62

What is Rescission Ab initio?

Answer 62

• ‘From the beginning’
• Undoes the whole of the contract and restores the parties to the position they were in prior to the making of the agreement

Question 63

Car and Universal Finance Co Ltd v Caldwell (1965)

Answer 63

• A car was sold and stolen
• The buyer reported the theft to the police
• The court said the buyer took necessary steps to make the rescission

Question 64

What are the 2 main types of bars to rescission and subtypes?

Answer 64

1. Common law bars
   - Restitution in Integrum is impossible
   - Third-party rights
   - Lapse of time
   - Affirmation of the contract
2. Statutory Bar
   - Statutory limitations
   - Misrepresentation Act s2(2)

Question 65

What is the Common Law bar ‘Restitution in Integrum is Impossible’?

Answer 65

• Where it is impossible to return the parties to their pre-contractual position, rescission will not be allowed

Question 66

Erlanger v New Sombrero Phosphate Co (1878)

Answer 66

• Erlanger promoted New Sombrero Phosphate Co company
• Erlanger purchased a phosphate mine (the Sombrero mine) and then resold it to the company at a significant profit without disclosing this fact to the company’s shareholders.
• The company, upon discovering this non-disclosure, sought to rescind the contract.
• By the time rescission was sought, the company had already started working the mine, extracting phosphate, and altering its condition. Erlanger argued that restitution was impossible due to these changes.
• The House of Lords granted rescission of the contract but required the company to compensate Erlanger for the phosphate already mined.
• This balance ensured fairness while upholding the principle that contracts obtained by misrepresentation or non-disclosure should not be allowed to stand.

Question 67

Spence v Crawford (1939)

Answer 67

• Spence purchased shares from Crawford
• Crawford made fraudulent misrepresentations about the financial status of the company whose shares were being sold, inducing Spence to purchase them
• After discovering the fraud, Spence sought rescission of the contract to undo the transaction and reclaim the purchase price of the shares.
• The House of Lords allowed Spence to rescind the contract and recover the purchase price of the shares, subject to adjustments for any benefits he had received from the shares during his ownership.

Question 68

What is the Common Law bar ‘Third-Party Rights’?

Answer 68

• The court will not order rescission where, before a contract has been avoided, an innocent third party has acquired rights in the property

Question 69

Crystal Palace Football Club Ltd v Dowie (2007)

Answer 69

• The claimant owned Crystal Palace Football Club
• Dowie was the club’s manager.
• Dowie wanted to leave his role as manager to be closer to his family in the North of England.
• The club agreed to terminate Dowie’s employment and waive a £1 million compensation clause, on the understanding that Dowie would not take a managerial position at another Premier League club.
• Shortly after the agreement, Dowie became the manager of Charlton Athletic, a rival Premier League club based in London.
• Crystal Palace alleged that Dowie had fraudulently misrepresented his intentions during the negotiations for the termination agreement by falsely claiming that his departure was motivated by a desire to move closer to his family.
• The club argued that Dowie had no intention of doing so and instead intended to join Charlton Athletic.
• The High Court ruled in favor of Crystal Palace, holding Dowie liable for fraudulent misrepresentation. The termination agreement was rescinded, and Dowie was required to pay the compensation specified in his original employment contract.

Question 70

What is the Common Law bar ‘Affirmation’?

Answer 70

• Failure to avoid a voidable contract, or choosing not to avoid a voidable contract will constitute affirmation of the contract, meaning that the right to rescind is lost

Question 71

Long v Lloyd (1958)

Answer 71

• The seller of a van affirmed a contract when he allowed the seller to pay half for repairs.
• The court said that by going back and allowing the buyer to pay half for repairs is affirmation of a contract

Question 72

What is the Common Law bar ‘Lapse of time’?

Answer 72

• If you wait too long between contracting and attempting to rescind the gap in time can be a bar to you rescinding the contract
• ‘Delays defeats equity’
• Where the MR is fraudulent, the time will run from when the fraud was discovered rather than when the contract is concluded
• What amounts to a ‘lapse of time’ is a question of fact to be determined on a case by case basis

Question 73

Leaf v International Galleries (1950)

Answer 73

• The Gallery innocently represented to Leaf that a painting was by John constable.
• Leaf bought the painting for £85. 5 years later when he tried to sell the painting he discovered it was not by John - Constable and was just a copy.
• The question or the court was whether he could rescind the contract on the count of misrepresentation.
• The court ruled he could

Question 74

What is the Statutory Bar of the Misrepresentation Act s2(2)?

Answer 74

• If a person has been misled into a contract by a misrepresentation, the court can decide to award damages instead of rescission
• It gives the court the power to let the contract stay in place but award money to the wronged party to make up for the misrepresentation.
• Would be used if a lot has changed since the contract was made of if rescinding would harm the third parties
• It only applies to non-fraudulent misrepresentation (where the false statement wasn’t made dishonestly).

Question 75

Do you need to have an agreement that can be rescinded in order to receive damaged in lieu of rescission under s2(2)?

Answer 75

• Yes, under Section 2(2) of the Misrepresentation Act 1967, there must be an agreement that could potentially be rescinded in order for the court to award damages in lieu of rescission.
• This is because Section 2(2) explicitly deals with situations where rescission is an available remedy, but the court chooses to award damages as a fairer alternative.

Question 76

What if rescission is barred, for example because of a lapse of time… can you still be awarded damaged in lieu of rescission under s2(2)?

Answer 76

• No, if rescission is barred (e.g., because of a lapse of time), you cannot be awarded damages in lieu of rescission under Section 2(2) of the Misrepresentation Act 1967.
• This is because Section 2(2) only applies where rescission is technically still available but the court decides that awarding damages is a fairer remedy.

Question 77

Atlantic Lines & Navigation Co Inc (1983)

Answer 77

• Hallam Ltd told Atlantic Lines they couldn’t fulfill a ship charter agreement before the delivery date, amounting to anticipatory breach.
• The court ruled that Atlantic Lines could treat the contract as terminated and claim damages for the loss of profit. - Damages were based on the difference between the contract hire rate and the market rate, considering Atlantic Lines’ ability to mitigate losses.

Question 78

Thomas Witter Ltd v TBP Industries Ltd (1996)

Answer 78

• TBP Industries made false statements to Thomas Witter, leading to the latter entering into a contract.
• The court ruled that Thomas Witter was entitled to rescission of the contract for fraudulent misrepresentation and awarded damages in lieu of rescission.
• This case is significant for reinforcing the principle that damages can be awarded for fraudulent misrepresentation even when rescission is available.

Question 79

Salt v Stratstone Speaclist Ltd (2015)

Answer 79

• The Court of Appeal ruled that damages under Section 2(2) of the Misrepresentation Act 1967 can only be awarded if rescission is still available.
• Since rescission was barred in this case (due to delay), the claimant could not claim damages under Section 2(2), but could still pursue damages under Section 2(1) for misrepresentation.
• The case clarified that rescission must be possible for Section 2(2) damages to apply.

Question 80

What are the Steps for Misrepresentation?

Answer 80

1. Is there an operative misrepresentation
   - False statement of past or existing fact
   - Reliance
2. Remedies
   - Will depend on the type of misrepresentation
   - Rescission (subject to bars to rescission)