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CONTRACT EXAM > Misrepresentation > Flashcards

Misrepresentation Flashcards

1
Q

What is misrepresentation?

A

A false statement of fact made during pre-contractual negotiations by one party which indices the other party to enter into the contract and as a result of which the other suffers loss

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2
Q

What are the elements of a misrepresentation?

A 
A. That the statement is not a term of contract (NOT A TERM)
B. Is it actionable 
-unambiguous 
-false 
-statement of fact or law
-addresses to party misled 
-induces contract 
-causes loss
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3
Q

What are the remedies for a misrepresentation?

A

1) Fraudulent
2) Negligent
3) Innocent

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4
Q

How to judge if it’s a TERM or MISREPRESENTATION?

A
  • What’s the intention of the parties
  • when was the statement made
  • how important was the statement to hearer
  • did either party possess specialist knowledge
  • did either party accept responsibility
  • was the statement later put into writing
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5
Q

Unambiguous (case)

A

McInnerny v Lloyd’s Bank [1974]

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6
Q

False - statement needs to be untrue (cases)

A

Avon Insurance plc v Swire Fraser Ltd [2000]

Test is whether statement is ‘substantially correct.’

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7
Q

Must be a statement of FACT

A

If it’s an existing fact = actionable

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8
Q

Must be a statement of FACT is not actionable if

A

A) statement of intention
B) statement of opinion
C) Mere advertising ‘puff’
D) Silence or non-disclosure

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9
Q

A) statement of intention

A

Honest intention not actionable if change in future. But lying about current intention is statement of fact…..
Edgington v Fitzmaurice
(1885)- director of a company borrowed money, representing that they would use the loan for the improvement of the company’s buildings but had intended from the start to use it to pay off serious debts the company owed (The court regarded this as a false statement of material fact and an actionable misrepresentation)
Wales v Wadham (1977)

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10
Q

B) statement of opinion

A

Bissett v Wilkinson (1927)
-honest opinion with no expert knowledge so this could never be actionable (NOT LIABLE)

Smith v Land & House Property (1884)

Liability if lie or cannot honestly hold opinion (greater knowledge)

Esso Petroleum Co ltd v Mardon (1976)
Expert IS liable (but then may be a term)

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11
Q

C) A “mere puff”

A

Dimmock v Hallett (1866-67) Example of “fertile and improvable land” - no liability

Carlill v Carbolic Smoke Ball co [1893]
Not as puff as
-contained factual information
- Evidence suggested reliance, e.g. the £1000 in bank

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12
Q

D) silence

A

No general duty TO disclose

Keates v The Earl of Cadogan (1851)

Skyes v Taylor- Rose (2004) depends on the facts of the case

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13
Q

D) silence or non disclosure

A

Dimmock v Hallett (1866-7)
-Half Truths (amounted to a misrep)
With v O’Flanagan [1936]
The doctor selling his practice but the true value was not true (amounted to misrep)
-Change in circumstances
-Statement becomes false due to circumstances changing
- Compres with Wales v Wadham (was a statement of future intention)

Spice Girls ltd v Aprillia World Service BV [2000]
-Misrepresentation by conduct

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14
Q

Statement of law

A

Pankhania v Hackney Borough Council [2002]

Now the same as a statement of fact

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15
Q

Must be addressed to the party

A
  • Direct
  • Indirect

Commercial Banking of Sydney v RH Brown (1972)

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16
Q

Inducement

A

Objective test
Statement must be material
Must influence a reasonable man

Pan Atlantic v Pine Top Insurance (1995)

If material inducement is inferred
Smith v Chadwick (1884)

17
Q

Inducement Cases

A

I) never knew of it
Horsefall v Thomas [1862]
Smith v Chadwick [1884]

ii) did not allow it to affect his judgement
Attwood v Small [1838]
JEB Fasteners v Mark Bloom & Co [1983]

But misrep need not be the only cause:
Edgington v Fitzmaurice (1885)

18
Q

Inducement Cases

A

iii) was aware tht it was untrue
Cooper v Tamms [1988]

But no duty to check
Redgrave v Hurd (1881)

If commercial more reasonable to check - Smith v Eric S Bush [1990] - more reasonable for representee to check

(Iv) made after contract agreed - after contract not actionable (Roscorla v Thomas (1842)-

sale of a horse seller states horse was ‘sound and free from vice’ but couldn’t claim because it was said after contract was agreed.

19
Q

Inducement Cases

A

Reliance on own investigations Attwood v Small (1838)

Mine was purchased and the information as to the remaining capacity of ore was false claimant couldn’t argue misrep because they had carried out a survey before buying the mine. His survey was inaccurate could get misrep because he relied on they’re own skill and judgement. NOT INDUCED

20
Q

What are the 3 types of misrepresentations?

A
  • innocent
  • fraudulent
  • negligent
21
Q

What is need for Fraudulent Misrepresentation?

A

An absence of honest belief is essential to constitute fraud

Derry v Peek [1889]

a) knowingly (with knowledge that it is false) or
b) without belief in its truth or
c) recklessly,careless as to whether it is true or false

Thomas Witter v TBP Industries (1996) “flagrant disregard for the truth”

22
Q

Negligent misrepresentation

A

Tort - Hedley Byrne v Heller & Partners (negligent misstatement) (1964)

  • existence of special relationship
  • duty of care
  • breach of duty of care
  • loss, which is foreseeable

Contractual claim - Negligent Misrepresentation under S2(1)

Misrepresentation Act 1967 - Burden of proof on defendant to show reasonable grounds
•false statement
•no reasonable grounds for belief in its truth

23
Q

Innocent misrepresentation

A

Redgrave v Hurd (1881) & 2(1) Misrepresentation Act 1967

Burden on misrepresentor to prove

  • believe it was true
  • reasonable grounds for belief
24
Q

What are the remedies for misrepresentation?

A

Rescission
Damages
Indemnity

25
Q

What is Rescission?

A

The setting aside of contract by innocent party.

Rescinds by making it clear that no longer bound by contract. What

26
Q

What are the bars to rescission??

A

Affirmation - Long v Lloyd (1958)Driving defective lorry. Right to rescind lost when driven after P became aware of misrepresentation.

Lapse of Time - Leaf v International Galleries [1950] Painting was not a constable. Buyer sought rescission due to innocent misrepresentation
HELD: 5 yrs unreasonable delay

Third party rights - Phillips v Brooks [1919]

27
Q

What is Indemnity?

A

Financial payment to make good a loss suffered by representee

Only in respect of obligations to 3rd parties incurred as necessary/inevitable result of contract

Whittington v Seale Hayne [1900] - Poultry farmers could recover rent, rates & repairs but not lost of profits

28
Q

Remedies for Misrepresentation (Fraudulent)

A

Remedies: Rescission and damages

Authorities;Doyle v Olby (Ironmongers) (1969) - a could recover for {all Direct loss} regardless of whether D could have foreseen the loss. Recoverability {not limited by concept of remoteness}

Smith & New Court Securities Ltd v Scrimaeour Vickers ltd (1996) - sale by D of 28 mill Ferranti shares for 82p each. P initially prepared to pay only 78p each. Share price went down, P sold shares losing 11mill
HL HELD: P entitled to recover {their full loss} I.e difference between sure purchase and sale price

East v Maurer (1991)- CA said can recover loss profits, but assessment on tortious basis
I.e level of profit expected had the false representation had not been made - NOT level of profits expected had the representation been true

29
Q

Remedies for Misrepresentation (Negligent)

A

Remedies : Rescission and damages

Authorities; Royscott Trust v Rogerson(1991)
Damages are the same as fraudulent misrepresentation

Smith New Court v Scrimgeour Vickers
Can only recover losses flowing from the misrepresentation- cannot claim total loss (not the same as fraudulent)

30
Q

Remedies for Misrepresentation (Negligent misstatement)

A

Remedies: Damages - The wagon Mound 1961

Authority: Hedley Byrne v Heller (1964)
Claimant must prove 
- foreseeability
- proximity 
-fair,just and reasonable
31
Q

Remedies for Misrepresentation (innocent misrepresentation)

A

Remedies : Court decides whether rescission is appropriate or whether to award damages

Authority: Misrepresentation Act 1967 S2(2)

CONTRACT EXAM (5 decks)

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