Misrepresentation - 2 Flashcards
What are the three types of misrepresentation?
- Fraudulent
Knowing the statement is false
Do not believe it to be true
Reckless
Does not care if its true
- Negligent
Not fraudulent or innocent
- Innocent
Reasonable belief to be true
Fraudulent Misrepresentation
Any action for fraudulent misrepresentation must be brought under the tort of deceit.
The leading case is:
Derry v Peek (1889) – fraud is a false statement
Lord Herschell said:
“made knowingly, or without belief in its truth, or recklessly, without caring whether it be true or false”
What is it necessary to demonstrate for fraudulent misrepresentation?
To establish fraudulent misrepresentation, it is necessary to show dishonesty i.e., a wicked mind.
If a person honestly believes their statement to be true, that person cannot be liable in the tort of deceit, no matter how ill advised, stupid, credulous or negligent he or she may have been.
The claim must be proven to the criminal standard of proof = beyond reasonable doubt.
Section 2(1) Misrepresentation Act 1967 creates statutory liability for misrepresentation.
The burden of proof is on the representor to show that they were not careless in making the statement.
Howard Marine & Dredging Co Ltd v Ogden (1978)
D wanted a quote for dumping excavated soil. C quoted but misstated the capacity of he barge, relying (incorrectly) on the Lloyd’s shipping register rather than the ships paperwork.
This caused delay to the defendant, and they refused to pay the hire charges.
COA held the onus was on the claimant to prove their reasonable belief in the statement. The evidence found no objectively reasonable grounds for disregarding the ship’s paperwork.
Name the two main remedies available for misrepresentation.
- Rescission
2. Damages
What do you have to do to rescind a contract?
For a contract to be rescinded, the rescission must be communicated to the other party.
If it is impossible to trace the other party, the requirement of notice may be waived provided the innocent party takes appropriate steps to indicate their intention of rescinding
Car and Universal Finance Co Ltd v Caldwell (1961)
Rescission
Car owner sold car to a rogue and the cheque was dishonoured
The rogue sold the car to the finance company and disappeared
When the owner realised the cheque had been dishonoured, he contacted the police demonstrating his intention to rescind.
As the rescission took place before the rogue sold the car to the finance company, good title of the car had not passed to the rogue so the owner could recover the car.
Name the four potential bars to rescission
- Affirmation
- Delay
- Impossibility (of rescission)
- Third Party Rights
The right to rescind a contract after a misrepresentation is lost if the contract is affirmed either expressly or impliedly by the representee after discovering the state of affairs and continuing.
Loss of right to rescind - affirmation
Long v Lloyd (1958)
C purchased a lorry said to be in good condition.
During the first journey, the lorry broke down and serious defects were discovered.
D agreed to pay 50% of the repair costs.
During the second journey, the lorry broke down again and more serious defects were uncovered.
It was held that the second journey affirmed the contract.
If there is undue delay in rescinding the contract, the right to do so may be lost.
Leaf v International Galleries (1950)
Painting was sold having being falsely misrepresented as being painted by Constable.
Five years later the truth was uncovered and the purchaser sought to rescind the contract.
It was held that due to the lapse of time, the claimant was unable to rescind.
Loss of right to rescind – where restitution is impossible
Where substantial restitution is impossible, the right to rescind the contract is lost.
The fact that the subject matter has deteriorated in the hands of the claimant and cannot be returned to the defendant in its original state may not prevent rescission. The court may order rescission and damages.
Loss of right to rescind – Third Party Rights
When third parties have in good faith, and for value, rights in property, they become the owners of that property in law and equity.
Phillips v Brooks (1919) – fraudulent purchase of a ring
Inntrepreneur Estates v Holland (1999)
Section 3 Misrepresentation Act 1967, as substituted by Section 8 UCTA 1977 rules that exclusion of liability for misrepresentation in a contract has no effect unless the test of reasonableness is satisfied
Exclusion of liability for misrepresentation
D was an experienced publican.
Granted a 20 year lease and was required to sell 400 barrels of beer per year.
Within 2 years the business was so bad he had to give up the lease.
D said he was induced into he contract based on the barrelage stated by C.
Court said that whilst the C had no intention to mislead, the barrelage was an important factor and that D would not have entered into the lease if he knew the real position.
Despite an exclusion clause, the court found it was unreasonable.
