Misrepresentation

Question 1

Representations are

Answer 1

statements of fact

Question 2

Misrepresentations are

Answer 2

false statements of fact. Make the contract voidable

Question 3

Representations distinguished from mere puff

Answer 3

Dimmock v Hallett - advertising puff will not amount to a representation

Question 4

Representations and terms

Answer 4

J. Evans v Andrea Merzario - term is a contractual promise to do smth it future, it is not misrepresentation

Question 5

Misrepresentation - elements

Answer 5

1. unambiguous
2. false
3. statement of fact or law
4. addressed to the party misled
5. material and induces the contract
6. causes loss

Question 6

Misrepresentation - elements

UNAMBIGUOUS

Answer 6

McInery v Lloyd’s Bank

Question 7

Misrepresentation - elements

FALSE

Answer 7

Avon Insurance v Swire Fraser

Question 8

Misrepresentation - elements

STATEMENT OF FACT OR LAW

Answer 8

Statement of fact
Kleinwort Benson v Malaysia Mining Corp - a representation is not an undertaking to do or not to do smth. It is a statement asserting a given state of affairs.

West London Commercial Bank v Kitson - false statement bof the existence of an Act of P. is misrep of fact.

Statement of Law
Pankhania v Hackney LBC - legal status of a car park was misrepresented. Misrep of law

Conduct
Gordon v Selico - attempts of concealment are deemed to be misrep
Spice Girls v Aprilia WS - concealed that they are alredy 4 rather then 5 girls. It was misrep.

Question 9

Misrepresentation - elements
STATEMENT OF FACT OR LAW
STATEMENT OF OPINION

Answer 9

• Layman’s opinion is not fact
  Bisset v Wilkinson
• Opinion expressed by an expert my be a statement of fact (where misrepresentor has greater knowledge than misrepresentee)
  Smith v Land & House Property Corp
• Opinion expressed by an expert my be a statement of fact (where expert gives the opinion in area of their expertise
  Esso v Marden

Question 10

Statement of future intention is not a fact

Answer 10

• Beattie v Ebury - a representation that smth will be done in the future cannot be true or false at the moment it was made
• Wales v Wadham - no duty to inform other party of change of future intention

Question 11

Dishonest statement of intention is fact

Answer 11

Edgington v Fitzmauirice - company issued a prospectus inviting the oubliс to purchase shares in the company. It said that the money would be used to improve the company’s premises and expand its business. It was lie, they knew that money would be used to pay off the companies debts.

Question 12

Silence is not fact

Answer 12

Keates v The earl of Cadogan - there is no duty to disclose

Question 13

Exceptions to the Silence rule

Answer 13

i) Half-truths (literally true, but factually misleading)

Dimmock v Hallett
Notts Patent Brick v Butler - solicitor did not look at the documents but said that there was to restrictions on the property “at the time of awareness”
ii) Continuing representations (true initial, but false at time of contracting

With v O’Flanagan (doctor;s practice that decreases in the price at the time of contracting)

iii) contracts uberrimae fidei (fiduciary relationships)

Question 14

Misrepresentation - elements

ADDRESSED TO THE CLAIMANT

Answer 14

either directly or thorough the 3rd party
Commercial banking of Sydney v RH Brown - opinion was not honestly held by the buyers bank manager who knew that the plaintiff’s bank has asked for the opinion on behalf of the customer likely to enter into trade relations with the buyer.
Opinion was given with the intent to deceive and with intent that it should be acted upon.

Question 15

Misrepresentation - elements

MATERIALITY and INDUCEMENT

Answer 15

Materiality
i) Pan Atlantic Insurance v Pine Top Insurance - test for materiality is objective: does statement relate to issue that would influence the reasonable man?

ii) Smith v Chadwick if statement is material - inducement generally inferred as a matter of fact
iii) Museprime Properties v Adhill Properties - unless the defendant can prove the claimant was not induced (had his own investigation)
iv) if fact is not material the claimant must prove that he was subjectively induced (Museprime Properties v Adhill Properties)

Inducement
i) Edgintgon v Fitzmaurice - Misrep need not be the only inducement. The claimant admitted that the reason of purchase of the shares was that he would be the owner of the company.

ii) JEB Fasteners v Marks Bloom - - Misrep must have been an inducement - negligent accounting, bankruptcy of the company. defendant proved that the only reason why the claimant wanted that company were two directors. Court agreed, it was not an inducement

Question 16

No misrepresentation where

Answer 16

a) th statement was not actually communicated to the other party,
Horsfall v Thomas - did not inspect the gun before the purchase, misrep did not induce him

b) claimant did not rely on the misrep
Smith v Chandweck

c) the statement was known to be untrue by the other party

Question 17

Inducement and Investigation

Answer 17

• Redgrave v Hurd - there is no general duty to check
• Smith v Eric S. Bush - the more commercial the more reasonable it is to check
• Attwood v Small - no inducement if rely on own investigation
• However, even if investigated
  Edgintgon v Fitzmaurice - partial reliance on misrep is also suficient
• S. Pearson v Dublin Corp - if misrep is fraudelent, than the investigation is ignored by the court

Question 18

Categories of misrep

Answer 18

1. fraudulent
2. negligent
3. innocent

Question 19

Fraudulent Misrep

Answer 19

Derry v Peek - fraud is proved where it is shwn that false representation has been made:
a) knowingly, or
b) without belief in its truth, or
c) recklessly, careless whether it be true
burden of proof is on the claimant or false

Thomas Witter v TBP Industries - the level of recklessness required was a “flagrant disregard for the truth”

Question 20

Fraudulent Misrep: Remedies

Answer 20

1) rescission
2) damages
3) indemnity (if relevant)

Question 21

Remedies, Rescission

Answer 21

General rule - in order to rescind, the representee must communicatethe intention to do so to the representor.

Car&Universal Finance v Caldwell - possible for the representee to record the intention to rescind by wau of some overt act which is deemed reasonable in the circumstances

Question 22

Bars to Rescission

Answer 22

• Representee affirms (declared his intention to proceed with the contract)
  Long v Lloyd
• Lapse of time

Leaf v International Galleries - general rule is that an action for rescission must be brought promptly. Thre it was innocent misrep.
Rule would not be applied to fraudulent misrep, as, in case of fraud, the time runs from the date when the fraud was, or ought reasonably to have been discovered.

• Restitution is impossible

Clarke v Dickson - representee was induced to take shares n a partnership which was later converted into a limited liability company. Rescission was impossible since the existing shares were wholly different in nature and status from those originally received.
Erlanger v New Sombrero Phospate - the court would not allow minor imperfections in the restoration of the original position to stand in the way of a remedy

• 3rd party rights accrue

Phillips v Brooks - at any time prior to the rescission, a person acquiring the goods under such a contract is able to pass good title to those goods to an innocent 3rd party who purchases the goods without notice of the misrep

• Damages in lieu of rescission

in cases of negligent or innocent misrep, the court exercises its discretion to award damages in lieu of rescission under s. 2(2) of the MA 1967

Question 23

Damages for fraudulent misrep

Answer 23

1. Expectation interest
   party may sue for the damages in an action for the tort of deceit - places the injured party in the position he would have been in had the contract been properly performed

Doyley v Olby (Oronmongers) -

• all the damages directly flowing form the act of fraudulent inducement
• don’t have to be foreseeable
• as long as not rendered too remote by the claimant

Smith New Court Securities v Scrimgeour Vickers - additional principles to Doyle:

• claimant must mitigate the loss as soon as fraud has been discovered
• any damages awarded will be reduced by the value of any benefit the plaintiff has acquired as a result of contract

2. Loss of profits
   East v Maurer - not what the claimant expected t make, but the amount he would have made by buying hypothetic salon in this certain area

BUT, if the claimant made any profit - would get it Downs v Chappel
UNLESS claimant can prove that he would make more profit -
Clef Aquitaine v Lapork

Defence of contributory negligence is not available
Standard Chartered Bank v Pakistan National Shipping

Question 24

Negligent misrep

Answer 24

Howard Marine v Ogden
s 2(1)  Misrepresentation Act 1967 - defendant will be liable for negligent misrep, unless he can prove that he had reasonable grounds to believe and did believe up to the time contract was made that the statement was true.
Were representor is found liable for a negligent misrep, he will be treated to all intents and purposes as if he had made a fraudulent  

N.B. There must be a contract between claimant and defendant for a claim under the Act. Otherwise, claimant must sue for negligent misstatement (tort)

Question 25

Negligent Misrep: Remedies

Answer 25

1) rescission
2) damages in lieu of rescission (s. 2(2))
3) damages (s. 2(1)
4) indemnity (if relevant)

Question 26

Damages for negligent misrep

Answer 26

Royscott Trust v Rogerson - measure of damages should be based on a tort of deceit

Smith New Court Securities v Scrimgeour Vickers - whereas damages for fraudulent misrep include all losses directly flowing from the transaction, damages for negligent misrep are all losses directly flowing from the particular negligent misrep in question

damages are reduced by any s. 2(2) MA 1967 damages in lieu

Damages in lieu of rescission are intended to compensate the claimant where the court has decided not to award rescission
Government of Zanzibar v British Aerospace (2000)- where the right to rescind has been lost at the date of the hearing, it is not open to the court to award damages in lieu under s. 2(2)
Thomas Witter v TBP Industries (1996) - may be that the claimant can have damages in lieu if he ever had the right to rescind.

Question 27

Innocent Misrep

Answer 27

s. 2(1) MA Act
burden of proof on the misrepresentor to prove that he had reasonable grounds to believe up to the time the contract was made that the facts represented were true

Question 28

Innocent Misrep: Remedies

Answer 28

1) rescission
2) damages in lieu of rescission (s. 2(2))
3) indemnity (if relevant)

Question 29

Wording re negligent misstatement

Answer 29

X’s statement does not induce a contract between A (the statement maker) and B (the person to whom the statement was made), per s 2(1) Misrepresentation Act 1967. It is a negligent misstatement (Hedley Byrne v Heller). In this case B need to prove that:
• His reliance was reasonably foreseeable
• Proximity
• Fair, just and reasonable (Caparo v Dickman)
Remedies: no rescission, only reasonably foreseeable damages (The Wagon Mound # 1).