Misrepresentation Flashcards
Smith v Hughes (1871
FACTS: C had purchased a quantity of what he thought was old oats having been shown a sample. In fact the oats were new oats. C wanted the oats for horse feed and new oats were of no use to him. The seller was aware of the mistake of the claimant but said nothing. The claimant brought an action against the seller based on mistake and misrepresentation.
JUDGEMENT: Both actions failed. The action based on misrepresentation failed as you cannot have silence as a misrepresentation. The defendant had not mislead the claimant to believe they were old oats. The action based on mistake failed as the mistake was not as to the fundamental terms of the contract but only a mistake as to quality.
PRINCIPLE: Caveat emptor (buyer beware) rule applies.
Bisset v Wilkinson [1927]
FACTS: C purchased a piece of farm land to use as a sheep farm. He asked the seller how many sheep the land would hold. The seller had not used it as a sheep farm but estimated that it would carry 2,000 sheep. In reliance of this statement the claimant purchased the land. The estimate turned out to be wrong and C brought an action for misrepresentation.
JUDGEMENT/PRINCIPLE: The Privy Council held that the statement was only a statement of opinion and not a statement of fact and therefore not an actionable misrepresentation. The claimant’s action was therefore unsuccessful.
Esso Petroleum v Mardon [1976]
role of special expertise
FACTS: M entered into a tenancy agreement with the defendant, E, in respect of a petrol station owned by the latter. During the course of the negotiation of the agreement, ‘expert’ advisers employed by the defendant had provided an estimate of the sales which the petrol station could expect which was based on inaccurate information and consequently was significantly inflated. The value of the rent on the agreement had been calculated based on this inflated figure. As a result, it was impossible for the plaintiff to operate the petrol station profitably.
JUDGEMENT: CA held that there was no action for misrepresentation as the statement was an estimate rather than a statement of fact. However, as D had taken it upon themselves to employ experts for the purpose of providing an estimate of sales, C was entitled to damages based on either negligent misstatement at common law or breach of warranty of a collateral contract.
Edgington v Fitzmaurice (1885)
FACTS: C purchased some shares in the defendant company. The company prospectus stated the shares were being offered in order to raise money to expand the company. In fact the company was experiencing financial difficulty and the money raised from the sale of the shares was going to be used to pay the company debts.
JUDGEMENT: Despite the fact that the statement related to a statement of future intent, it was an actionable misrepresentation as the defendant had no intention of using the money to expand the company.
PRINCIPLE: Statements of future intention are generally not actionable as misrepresentation but the representation of future intent in this case acted as an inducement into the contract.
Wales v Wadham [1977]
FACTS: Husband left wife to live with another woman. Agreed to alimony on the condition that she did not re-marry and at the time of the divorce settlement, the wife represented that she had no intention or remarrying. Before the agreement was concluded, her intentions changed, but the representation was not corrected. Husband sought to rescind the contract on basis of misrepresentation.
JUDGEMENT: Court ruled that the contract could not be rescinded as her representation was true at the time.
PRINCIPLE: Statements of future intention are generally not actionable as misrepresentation.
With v O’Flanagan [1936]
FACTS: C purchased a medical practice from the defendant. C was induced to buy the practice by D’s statement that the practice made £2,000 per annum. This statement was true at the time it was made. However, subsequently the defendant became ill and many patients went elsewhere. By time the sale was completed the practice was virtually worthless.
JUDGEMENT/PRINCIPLE: Where a statement is rendered false by a change in circumstances there is a duty to disclose the change. A failure to do so will result in an actionable misrepresentation.
Spice Girls Ltd v Aprilia World Service BV [2002]
FACTS: S worked together as a five girl pop group. A had signed a sponsorship agreement, but now resisted payment saying that one of the five, Geri, had given notice to leave the group, substantially changing what had been promised. S acknowledged that Geri had said she would leave, but insisted that no real intention to leave had existed.
JUDGEMENT: Court held S liable for negligent misrep.
PRINCIPLE: Generally, a person who is about to enter into an agreement is under no duty to disclose information. Here the group knew that the other party was relying upon a representation, and could not discharge the requirement to show that they did not know of its falsity, and were liable in damages to the defendant.
Gordon v Selico Co Ltd (1986)
FACTS: Selico owned a flat and it was not in a good condition. Selico painted over the rot inside the house to hide it. A person bought the flat believing it to be okay, but said there had been misrepresentation when discovering the truth.
JUDGEMENT: The judge held that D1 was liable to P in damages for deceit because there had been at the time of the purchase a fraudulent concealment of dry rot in the course of work ordered by D2 on D1’s behalf. Selico deliberately went out of his way wanted to cover rot; conduct sufficient to amount to statement of fact.
PRINCIPLE: Statement of fact can be by words/conduct
Museprime Properties Ltd v Adhill Properties Ltd (1991)
Burden of proof
“If the misrepresentation would have induced a reasonable person to enter into the contract then the court will, as we have seen, presume that the representee was so induced and the onus will be on the representor to show that the representee did not rely on the misrepresentation either wholly or in part. If, however, the misrepresentation would not have induced a reasonable person to contract, the onus will be on the representee to show that the misrepresentation induced him to act as he did.”
Smith v Chadwick (1884)
FACTS: C claimed to have entered into the contract in reliance on the truth of a misrepresentation by the seller. C claimed damages for deceit through having been induced to buy shares in an iron company by false representations in a prospectus as to the output of the iron works.
PRINCIPLE: There cannot be inducement where the representation was regarded as unimportant.
“the present value of the turnover or output of the entire works is over £1,000,000 sterling per annum.”
C’s claim failed because the critical words of the prospectus were ambiguous, and the plaintiff had failed to show that he understood them in a sense which was false.
Redgrave v Hurd (1881)
FACTS: A solicitor purchased into the partnership in the solicitors’ firm. He was told the partnership had an income of £300 per year and was given the opportunity to look at the accounts. He declined the offer to check the accounts and took them at their word. In fact the income was only £200 per year.
JUDGEMENT: He was entitled to rescind the contract as he relied on the statement. The fact that he had declined the offer to check the books reinforced rather than negated that reliance.
PRINCIPLE: It’s immaterial that claimant could have discovered the truth had he made the correct enquiries.
Derry v Peek (1889)
fraudulent misrep
FACTS: The plaintiff (i.e. claimant) bought shares in a tram company after its prospectus stated that they would use steam power instead of the traditional horse power (this was evolutionary!). The company assumed they would be allowed to use steam power, but turned out permission to use steam powered trams was refused. The plaintiff wanted damages for tort of deceit as the prospectus had not given the truthful facts.
JUDGEMENT: HoL said with deceit there needs to be fraud, but the tram company had not been fraudulent because they reasonably expected to be allowed to use steam.
PRINCIPLE: Fraudulent misrep per Lord Herschell = must have been known to be untrue, or made recklessly as to whether the statement was true or not
Hedley Byrne v Heller [1964]
FACTS: Hedley was an advertising company and they did some advertising for Easy Power. E had not paid H for a previous contract, so H not want to enter into another contract without being paid. They asked the bank to give a report on the financial standing of E to see whether they could enter into another contract. The bank replied in writing giving a good report, but “without liability”: the bank showed E had enough money for “ordinary business proceedings”. E subsequently went into liquidation and did not pay, so H sued the bank.
JUDGEMENT: There was no liability because of the exclusion clause bank had put, but without this the court said the bank was liable for negligent misstatements causing economic loss because they owe a duty of care. So the tort of negligence was being extended to situations where there is negligent misstatement causing pure economic loss.
PRINCIPLE: Negligent misrep = where the representor makes a representation while having no reasonable basis to believe in its truth
Howard Marine v Ogden [1978]
FACTS: O had to hire some barges to get rid of some clay. They needed the barges to hold a certain amount of clay so they asked the plaintiff (i.e. claimant) what volume the barges would hold so they could calculate how many days they needed to hire the barges for. They said it could hold 1600 tons but turns out this was not accurate and could only hold about 1055 tons. It took them a lot longer and they lost money so they sued for negligent misrepresentation, but H argued that they reasonably believed what they said was true because of what was said in Lloyd’s register.
JUDGEMENT: The HoL were not convinced because H had registration documents saying the exact capacity of the barges without referring to the register.
PRINCIPLE: Under the S2(1) of the MA1967, the representor bears the burden of proof. To escape liability under the Act, the representor must demonstrate he had reasonable grounds to believe, and did believe, the statement was true.
Leaf v International Galleries [1950]
FACTS: C bought a painting from D, and they both believed it was done by a famous artist. 5 years later it was found it was not done by any famous painter, so the claimant bought an action of misrepresentation
JUDGEMENT: The claim for innocent misrepresentation succeeded, BUT C could not rescind the contract due to lapse of time
PRINCIPLE: The right to rescission will be lost if there is a considerable lapse of time between the misrepresentation and the claim being brought.
