Misrepresentation Flashcards
What is a ‘representation’?
A statement asserting the truth of a given state of facts
How is an actionable misrepresentation defined?
An unambiguous false statement of fact made to the claimant which induces the claimant to enter into the contract with the statement maker
What must be present for an action in misrepresentation to succeed?
All elements of the definition
What are the five elements of an actionable misrepresentation?
Unambiguous
False
Statement of fact
Made to the claimant
Inducement
How is ‘unambiguous’ interpreted?
Must be clear; cannot be interpreted unreasonably by the representee
How is ‘false’ interpreted?
Not false if ‘substantially correct’: meaning that the difference between what is represented and what is correct wouldn’t induce a reasonable person to enter a contract
How is ‘statement of fact’ interpreted?
A statement asserting a given state of affairs
How is a representation distinguished from ‘mere puff’?
Advertising language / description is not a misrep.
Can statements of fact be made via conduct?
Yes - e.g. intentional concealment of a defect
Can a statement of law give rise to an actionable misrep.?
Yes
What three categories are generally not actionable?
Statements of opinion
Statements of future intention
Instances of silence
How is ‘inducement’ established?
Step One: Objective Test
Would the statement have influenced the reasonable person?
If yes - defendant must prove it didn’t influence the claimant
If no -
Claimant must prove that they were subjectively induced
In what cases will there be no actionable misrepresentation?
When the statement is not actually communicated to claimant
When statement did not affect the representee’s decision to enter the contract
When the statement is known to be untrue by the representee
Does the misrep need to be the only reason the claimant enters the contract?
No - can be one of many factors
Is misrep actionable when the claimant tests validity by investigating the representations themselves?
No - a party cannot bring a claim in misrepresentation when it has relied not on the misrepresentation but on its own investigations.
What is the crucial point about independent investigations?
It is not whether or not they have been made; it is whether or not they have been relied upon.
No general duty to check and enquiries do not automatically block a misrep claim.
What defence does conducting independent checks open up?
Contributory negligence [cannot be pleaded if misrep is fraudulent]
When can a statement of opinion be considered a statement of fact?
When the representor has significantly more knowledge / experience than the representee.
This is because it is implied that you have the facts to back up this opinion.
Can a future promise be a misrep?
No, unless at the point in time they make the promise they know that they cannot do what they state or do not intend to do it at all.
What are the three exceptions to the general rule to disclose?
Half-truths
Continuing representations
Contracts uberrimae fidei
What is a ‘half truth’
A statement which is technically true but misleading - can be a misrep
Why can a continuing representation be a misrep?
Because if a statement made at the start of negotiations becomes false there is an obligation to correct it.
What are contracts uberrimae fidei?
Insurance is most standard example but also company and directors, trustee and beneficiaries of a trust
What are the three categories of misrepresentation?
Fraudulent (tort)
Negligent (statutory under S2(1) MA)
Innocent “”
How is fraudulent misrep defined?
False rep made knowingly, without belief in its truth, recklessly
Motive is immaterial
How is recklessness defined?
Flagrant disregard for the truth - must be more than an inadvertent failure to disclose
Who bears the burden of proof in fraudulent misrep?
Claimant - and this is a difficult one to discharge
When is someone liable for negligent misrepresentation?
Someone is liable unless they can prove that they had reasonable grounds to believe, and did believe, that the statement was true
If someone is found liable for negligent misrep, how are they treated?
As if they have made a fraudulent misrep - important re damages.
Where does the burden of proof lie for negligent misrep?
The defendant must prove that they had reasonable grounds to believe their statement and did believe their statement.
What are the components of an innocent misrepresentation?
The defendant proves that they had reasonable grounds for belief in the truth of their statement
Proves that they believed up to the time of the contract that what they were saying was true
From a remedies perspective, what is the effect of misrepresentation?
Renders the contract voidable but not void
What must the representee do in order to rescind the contract?
Communicate this to the representor, or start court proceedings
What type of remedy is rescission?
Equitable - at the discretion of the court
What are the four key bars to rescission?
Affirmation
Lapse of time
Restitution is impossible
3rd party rights accrue
What can be awarded if obligations have emerged as a direct result of the contract?
An indemnity - likely to be awarded for an innocent misrepresentation as damages aren’t available as of right
How are damages calculated for fraudulent misrepresentation?
On a tortious basis e.g. placing the innocent party in the position they would be in had the misrepresentation not been made.
“All damage flowing directly from the tortious act”
Claimant must mitigate as soon as fraud is discovered
Damages reduced by any benefit accrued.
Is contributory negligence available as a defence for fraudulent misrepresentation?
No
How are the damages calculated for negligent misrep?
The same basis of fraudulent misrep
Is contributory negligence available as a defence for negligent misrepresentation?
Yes
What remedies are available to innocent misrep?
Only rescission and an indemnity if relevant
When can the court award damages in lieu of rescission?
For negligent and innocent misrep only; if more equitable / rescission impossible
What is the difference between S2(1) and S2(2) MA damages?
S2(1) - damages compensating the claimant for loss flowing from the misrepresentation
S2(2) - compensate where rescission has not been awarded
Can misrepresentation be excluded via an exemption clause?
Only in so far as it is reasonable
What is a sensible clause to include to mitigate issue of misrep?
Non reliance clause; still subject to reasonableness test likely
