Misrepresentation

Question 1

MISREPRESENTATION MUST BE UNAMBIGUOUS

Answer 1

AN AMBIGUOUS REPRESENTATION GENERALLY DOES NOT GIVE RIGHT TO A CAUSE OF ACTION IN MISREPRESENTATION.

When representor makes representation that is true, but so obscure in its meaning that representee misinterprets it and decided to enter into the contract on the basis of their misinterpretation.

Exception: when representor is guilty of fraud there is right of action when representor DELIBERATELY makes ambiguous statement intending it to bare a meaning which to his knowledge is untrue, intending for the statement to be understood in that sense by the representee.

Question 2

Carlill v Carbolic Smoke Ball Co.

Answer 2

An example where there CAN be liability for a MERE PUFF.

Normally, mere puffs are too ambiguous to give right to a cause of action.
BUT - test: if mere puff is a verifiable fact - then can be liability.
In Carlill - depositing money with the Bank was a verifiable fact.

Question 3

Must be FALSE STATEMENT OF FACT OR LAW

Answer 3

Must be false statement.
True statements - no cause of action.
Will be treated as true if it is substantially correct and difference between representation and truth would not have been likely to induce person into contract.

Question 4

Must take the form of a STATEMENT

Answer 4

STATEMENT
Needs to be some positive action on the part of the representor.
Can be through conduct, but generally, not for non-disclosure.

Question 5

STATEMENT generally MUST BE ONE OF FACT

Answer 5

Not a promise

Distinction between statements of fact from statements of opinion and intention.

Question 6

Statement must be ADDRESSED TO THE PARTY MISLED.

Answer 6

Can be done directly or INDIRECTLY too

E.G. Representor makes statement to 3rd party with intention that 3rd party relays the information to the representee.

Question 7

Statement must be MATERIAL

Answer 7

Statement must be one that would affect the mind of a REASONABLE PERSON in deciding whether or not to enter into a contract.

If YES, burden of proof on representor to prove that representee did not rely on their misrepresentation.

If NO, burden of proof on representee to show that they did in fact rely on misrep to induce them into contract.

Question 8

Horsfall v Thomas (1862)

Answer 8

Authority that for a misrep to be material, misrepresentee needs to have known about it at the time of entering into the contract.

(Case - purchased gun - defective - stopped paying installments) - when sued for payment, argued misrep.

Question 9

A misrepresentation is an unambiguous false statement of fact which is addressed to the party misled and induces that party to enter into a contract.

Answer 9

Definition of misrepresentation.

Question 10

Must have INDUCED CLAIMANT INTO CONTRACT.

Answer 10

Must be intended to be acted upon and BE acted upon.

Need not be only inducement - suffices that it played a part in representee’s mind.

Question 11

Raiffeisen Zentralbank Osterreich AG v Royal Bank of Scotland Plc [2010]

Answer 11

Claimant must show that misrep. played ‘a real and substantial part’ and ‘but for’ M - would not have entered into contract on those terms, even though there may have been other inducing factors.

Question 12

BISSET v WILKINSON [1927]

Answer 12

AUTHORITY: Generally, a statement of opinion does not give right to a cause of action, where representor honestly hold opinion.

Question 13

Esso Petroleum Ltd. v Mardon [1976]

Answer 13

Distinguished from Bisset v Wilkinson - adaptation to general rule that statements of opinion are not actionable.

IF THE FACTS ON WHICH THE OPINION IS BASED ARE WITHIN THE KNOWLEDGE OF THE REPRESENTOR - MAY BE TREATED AS A STATEMENT OF FACT.

I.E. When representor states an opinion but is in a position to check the facts of his opinion but fails to do so. Given his specialist knowledge he professes to have, he IMPLIEDLY REPRESENTS THAT HE HAS REASONABLE GROUNDS FOR HIS OPINION.

Question 14

Edgington v Fitzmaurice (1885)

Answer 14

AUTHORITY THAT A STATEMENT OF INTENTION IS ACTIONABLE AS A MISREPRESENTATION WHEN REPRESENTOR DID NOT ACTUALLY HAVE THE INTENTION AT THE TIME OF MAKING THE STATEMENT.

Question 15

Kleinwort Benson Ltd v Malaysia Mining Corp. [1989]

Answer 15

Distinguishable from Edgington v Fitzmaurice

Someone who states his true intention but then changes mind will not be liable in misrepresentation.
Statement of intention only creates moral duty, not legal (unless intention is put on a contractual footing, or warranted that won’t change mind.)

Question 16

East v Maurer [1991]

Answer 16

Hairdresser competition case.

Reinforces Edgington v Fitzmaurice - fraudulent misrepresentation as to one’s intentions is actionable in tort of deceit.

Question 17

With v O’Flanagan [1936]

Answer 17

Authority:
Exception to the rule of no general duty to disclose:

THERE IS A DUTY TO CORRECT A REPRESENTATION, WHICH WHEN MADE WAS TRUE, BUT HAS SINCE BEEN FALSIFIED BY LATER EVENTS.

Representor MUST BE AWARE that his representation has been made false.
“Continuing representation.”

Question 18

Notts Patent Brick and Tile Co v Butler (1886)

Answer 18

Authority: duty to disclose when statements are true in their literal words but implies certain addition facts that are untrue.

In case - D said he ‘was not aware’ of any restrictive covenants on land being purchased - did NOT DISCLOSE that the reason for this was that he hadn’t checked, rather than actually knowing.

Question 19

Jones v Bowden (1813)

Answer 19

Authority that there is a duty of disclosure when it is required by trade custom.

Question 20

Redgrave v Hurd (1881)

Answer 20

Authority that RESCISSION as an available remedy is not confined to fraudulent misrepresentations - but available for ALL MISREPS - INCLUDING INNOCENT AND NEGLIGENT.

Also - fact that representee had the chance to discover the truth, but was negligent in his due diligence, did not preclude his right to rescission.
(Nowadays - in claim in tort for negligent misrep - could lead to finding of contributory negligence.)

Question 21

Car and Universal Finance Co. v Caldwell [1965]

Answer 21

Exception to the general rule that a party seeking rescission must bring this to the attention of the other party.

WHERE THE REPRESENTOR ABSCONDS (ABSENT) IT IS SUFFICIENT FOR THE PARTY SEEKING TO RESCIND CONTRACT TO TAKE SUCH STEPS AS REASONABLE IN THE CIRCUMSTANCES TO DEMONSTRATE THAT THEY ARE SETTING THE CONTRACT ASIDE,

Question 22

BARS TO RESCISSION

Answer 22

(1) Affirmation

(2) If a bona fide third party purchaser for value acquires the goods which are the subject matter of the contract before it was rescinded
(Car and Universal Finance Co. v Caldwell distinguished as reasonable steps were taken to demonstrate rescission.)

(3) By the lapse of time
(4) When impossible to restore the parties to their pre-contractual position.
(5) S.2 (2) MA 1967

Question 23

Leaf v International Galleries [1950]

Answer 23

Art sold - thought to be from artist - apparent later that it was not an original (innocent misrep)
Brought claim for rescission 5 years later
NOT ALLOWED TO RESCIND ON BASIS THAT A REASONABLE TIME HAD ELAPSED SINCE THE PURCHASE - RESCISSION NO LONGER AVAILABLE.

“Contracts such as this cannot be kept open and subject to the possibility of rescission indefinitely” per JENKINS LJ

Question 24

Clarke v Dickson (1858)

Answer 24

Restituio in integrum

Claimant must rescind contract in total or not at all - not fair for claimant to be unjustly enriched as a result of rescission.
i.e. can’t get money back and also keep the good he contracted to buy.

Question 25

S.2(2) Misrepresentation Act 1967

s.b. page 18

Answer 25

Comes to the aid of non-fraudulent mispresentors:

If - representation is non-fraudulent - and C is, as normally, entitled to rescission (Redgrave v Hurd), but rescission would be very harsh on D…
COURT MAY DECLARE CONTRACT SUBSISTING (surviving) AND AWARD DAMAGES IN LIEU OF RESCISSION, IF OF OPINION THAT IT WOULD BE EQUITABLE TO DO SO.

Question 26

William Sindall Plc v Cambridgeshire CC [1994]

Answer 26

Illustration of S.2(2) of M.A. 1967

Courts will look to find most economically desirable outcome for both parties.
Prevents parties from trying to get out of a bad bargain easily, when loss can be compensated as much lower price than rescission.

Court has discretionary power to award damages in lieu of rescission when satisfied that damages would afford adequate compensation for claimant, ‘having regard to the nature of the misrepresentation and the fact that the injury suffered by the plaintiff is small compared with what rescission would involve.’

Court should have regard to:

• Nature of the misrep
• Loss that would be caused if contract was upheld, and damages awarded.
• Loss that would be caused by rescission.

Question 27

Hedley Byrne & Co. Ltd v Heller & Partners Ltd [1964]

Answer 27

Made negligent misrepresentations actionable.

Question 28

S.2 (1) M.A. 1967

Answer 28

DAMAGES for innocent/negligent (fraudulent) misrep
TO BE LIABLE IN DAMAGES THE SAME AS IF MISREP HAD BEEN MADE FRAUDULENTLY.

‘The fiction of fraud’.

Question 29

Doyle v Olby (Ironmongers) Ltd [1969]

Answer 29

Authority for how damages for fraudulent misrep should be assessed.
- To be applied to assessment of damages for non-fraudulent misrep for the purposes of S.2(1) M.A. 1967

PROPER ISSUE OF DAMAGES IS THAT DONE IN TORT OF DECEIT, AND NOT FOR BREACH OF CONTRACT.
CLAIMANT SHOULD BE PUT IN POSITION HAD MISREP NOT BEEN MADE (not position in breach of contract - had misrep been made true.)

Thus, D also liable to compensate C for all consequential losses - as a result of purchasing business induced by fraudulent misrep - had to pay damages for subsequent poor performance of business - not just the losses directly ensuing from the fraudulent misrep.

DOES NOT MATTER IF CONSEQUENTIAL LOSSES ARE FORESEEABLE OR NOT.

Question 30

Royscott Trust Ltd. v Rogerson [1991]

Royscott Trust Ltd. v Maidenhead Honda Centre

Answer 30

Controversial - example of S.2(1) in operation.

Innocent/negligent misrep - D made to pay all consequential losses as a result thereof - as damages to be assessed as if misrep made ‘fraudulently’.

Damages apportioned as such - applying Doyle v Olby (Ironmongers) Ltd
Issue in case arose: should damages be assessed as in the tort of fraudulent misrep or tort of negligence?

In fraudulent misrep tort: ALL CONSEQUENTIAL LOSSES COMPENSATED EVEN IF NOT FORESEEABLE.
whereas: in negligence - only foreseeable consequential losses.

HELD; WORDING OF S.2(1) WAS CLEAR - MEANT TO BE ASSESSED AS IF FRAUDULENTLY MISREPRESENTED - THUS ALL CONSEQUENTIAL LOSSES EVEN IF NOT FORESEEABLE.

Question 31

Smith New Court Securities Ltd v Citibank NA (and Scrimgeour Vickers (Asset Management)) [1997]

Answer 31

SNC - bough shares in a public company - induced by false representation made by D (non-fraudulently)

Independent fraud at the co. in which SNC was shareholder - value of shares dropped dramatically.

C of A held this independent fraud was not foreseeable - only awarded SNC c. 1M for the other losses - bulk of losses caused by the independent fraudulent act.

H of L overturned - awarded SNC c. 10M - Ds liable for ALL CONSEQUENTIAL LOSSES, EVEN IF NOT FORESEEABLE.
To be put in position as if MISREP HAD NO OCCURED.

Affirms ROYSCOTT AS GOOD LAW.
S.2(1) M.A. 1967 - damages - as if misrep made fraudulently - thus includes all consequential losses, even if unforeseeable.

Question 32

Gran Gelato Ltd v Richcliff (Group) Ltd [1992]

Answer 32

Authority that DEFENCE OF CONTRIBUTORY NEGLIGENCE is available for an action under S.2 of the M.A. 1967

Question 33

Howard Marine and Dredging Co. Ltd v A Ogden & Sons (Excavations) Ltd [1978]

Answer 33

Illustration:

Under S.2(1) - Burden of proof is on the CLAIMANT, but ALL THEY NEED TO PROVE IS THAT A MISREPRESENTATION WAS MADE BY THE OTHER PARTY TO THE CONTRACT.

Burden then falls on DEFENDANT to PROVE THAT THEY HAD REASONABLE GROUNDS TO BELIEVE THAT STATEMENT WAS TRUE.

• In the past, when claimants sued in tort of deceit - C actually had to prove that D was fraudulent.
  NOW MUCH EASIER FOR CLAIMANTS - MUCH MORE ADVANTAGEOUS TO BRING A CLAIM UNDER S.2 MA 1967 THAN IN COMMON LAW.

In this case- D - had given incorrect representation RE capacity of ships in charterparty - C showed that this was a misrep
D tried to argue that they had reasonable ground to believe in that representation - as referred to the v. reliable Lloyds Shipping register, which was unusually wrong.
But held that they could not reasonably believe in representation as did not check the ship’s own papers.

SHOWS - VERY HARD FOR DEFENDANTS TO PROVE THAT THEY HAD REASONABLE BELIEF FOR THEIR STATEMENT.

Required to pay damages as if fraudulent (s.2(1)) (Royscott) when they had barely even been negligent.

Question 34

• When misrep made by 3rd party, not privy to the contract.
  MUST BE BROUGHT IN COMMON LAW.
• Claimant who has himself been careless - may prefer tort of deceit claim as contributory negligence not available.
• S.2(1) - if misrep is a term in contract and not a statement made prior to completion - can’t prove inducement

Answer 34

When advantageous to bring claim in common law, not S.2(1)?

Question 35

Derry v Peek (1889)

Answer 35

Common law - deceit

Statement is FRAUDULENT WHEN:

1) Made with knowledge of its falsity, or
2) Without believing that it is true, or
3) With a reckless indifference to the truth

Question 36

Misrepresentation Act 1967 S.1

s.b. page 18

Answer 36

Gives right to rescind when (a) the misrepresentation has been incorporated into the contract as a term or (b) the contract has been performed

Gives claimant right to rescind for misrepresentation without taking away the separate remedies for breach of contract.

Question 37

William Sindall Plc v Cambridgeshire CC

Answer 37

When court is awarding damages in lieu of rescission under s.2(2)

WILL COMPENSATE FOR LOSS CAUSED BY THE MISREPRESENTATION ALONE BUT NOT PUT THE CLAIMANT BACK INTO THE POSITION AS IF THE CONTRACT WAS NEVER MADE.

i.e. - contract was induced by a minor, non-fraudulent misrep.
Minor misrep has caused claimant some losses.
However, still a lot of benefit of being in contract, even though it was induced by misrep.
Thus, using discretion under s.2(2) - court can award damages in lieu of rescission to compensate the damage caused by the MISREP, but NOT to take contract away and put claimant in position as though misrep was never made.

Question 38

Zanzibar v British Aerospace Ltd

Answer 38

Court can only award damages in lieu of rescission under s.2(2) if it already has jurisdiction to rescind. But can’t do both - i.e. can’t award damages AND rescind.

Question 39

M.A. 1967 S.3

Answer 39

Exclusion of liability for misrep - term which:

(a) tries to limit any liability for misrep
(b) any remedy available to the other party by reason of misrep

SUBJECT TO REQUIREMENT OF REASONABLENESS PER UCTA S.11(1) - Burden on those claiming that term satisfies requirement to show that it does.