Misrepresentation Flashcards
What is actionable misrepresentation?
A statement of material fact made prior to the formation of the contract by one contracting party to another which is false or misleading & which induced the other party to enter into the contract.
What types of statement are generally NOT treated as being statements of material fact?
- Opinion* (Bisset v. Wilkinson [1927] )
- Mere sales-talk “puff” (Dimmock v. Hallett(1866))
- Statements of law(Solle v. Butcher [1950])
- Non disclosure of information & silence* (Keats v. Cadogan (1851))
- Statement of future intention* (Edgington v Fitzmaurice (1885))
What are the exceptions to the general rule that silence or non-disclosure of information?
- Contracts of upmost good faith (e.g insurance contracts)
- Where there has been a change in circumstances (With v. O’Flanagan [1936])
- Half truths
- Where there is a fiduiary relationship where full disclosure is required (e.g doctor - patient)
What is misrepresentation by conduct
Misrepresentation may also be done through the impression a party gives through its conduct prior to contracting
Key case - Spice Girls v. Aprilia World Service BV (2000)
Can a statement made after the formation of contract qualify as a misrepresentation?
No, statements can only be misrepresentations if made before the contract is created.
What is meant by inducement to contract?
The statement being considered MUST be an inducement to the other party to enter the contract.
Therefore…
- The claimant must have known of the existence of the statement. (Horsefall v. Thomas (1862)
- The claimant must have relied upon the statement when contracting (Atwood v. Small (1838) & JEB Fasteners Ltd v. Marks Bloom & Co [1981]
- The statement must be material
What are the three types of misrepresentation in order from least to most serious?
- Innocent misrepresentation. This is not actionable.
- Negligent misrepresentation. (Hedley Byrne & co ltd v. Heller & Partners led [1976] & ESSO Petroleum & Co ltd v. Marden [1976]
- Fraudulent misrepresentation. ( Derry v. Peek (1889))
Historically all misrepresentations that were not fraudulent were considered innocent. How has the law developed in this area?
There are now actions available in both common law and statute for certain non-fraudulent misrepresentation. These misrepresentations are considered ‘negligent misrepresentations’.
Common law.
Hedley Byrne & Co ltd v. Heller & Partners ltd[1963].
It was decided that Negligent statements could attract liability and this would extend to pure economic loss if:
1. The defendant carelessly makes a statement to the claimant
2. The circumstances are such that it would be reasonable to assume the statement could be relied upon
3. There was a special relationship between the parties.
Statute. Section 2(1) Misrepresentation Act 1967
Where a person enters into a contract after a misrepresentation is made to them & as a result of this suffers a loss then the person that made the misrepresentation would be liable for damages if they would have been liable had the misrepresentation been fraudulent unless they can show that they had reasonable ground to believe & did believe up to the time the contract was formed that the statement was true.
What remedies are available for misrepresentation?
The remedy available will depend on they type of misrepresentation and the particular details of the case
Innocent misrepresentation : damages or rescission
Negligent and Fraudulent misrepresentation: rescission and/or damages
What is rescission?
Rescission is an equitable remedy that involves setting aside the contract.
Rescinded contracts are terminated ‘ab intio’ (from the start).
The object of rescission is to put the contracting parties back into the position they would have been in had the contract never existed
What are the 5 limitations on the availability of the remedy of rescission
- Affirmation
- Lapse of time
- Rights of 3rd parties
- Restitution is impossible
- Damages in lieu of rescission is better (Section 2(2) Misrepresentation Act 1967)
