Misrepresentation

Question 1

Misrepresentation component : an inaccurate statement of fact. Includes mistakes as to law opinion.

Answer 1

Brennan v Bolt Burdon: a misrepresentation as to the law can also count as misrep.

Question 2

Cannot be a mere puff authority

Answer 2

Dimmock v Hallett: selling land and claiming it was ‘fertile and improveable’ was just a mere puff.

Question 3

The misrepresentation must be as to a material fact

Answer 3

Museprime Properties

Question 4

What is the authority for the proposition that a misrepresentation can be made by conduct?

Answer 4

Spice Girls v Aprilia: where the spice girls posed for photos in their full group, this gave the misleading impression that they would be staying together in a group. However, this was not the case and aprilia sued them.

Question 5

What are the key authorities when you are considering whether there is a statement as to fact or opinion?

Answer 5

(1) If the statement is as to an opinion, it may still be a misrepresentation as to the fact of whatever opinion he holds (Edgington v Fitzmaurice);
(2) It can suggest the opinion is based on a fact: IFE Fund SA v Goldman Sachs/Smith v Land and House Property (describing a tenant as ‘most desirable’);
(3) Bisset v Wilkinson: saying that the land could accomodate x number of sheep was pure speculation as it had never been used for that purpose (‘his idea’). Note, that whether a misrepresentation as to an opinion suggests a fact hinges on: (a) relative knowledge/expertise; (b) skill; (c) External and Exclusive information.
(4) if the defendant has special professional knowledge this might lead to them being bound: Nottingham Patent Brick & Tile Co (lawyer by saying there was no restrictive covenant suggested he had looked at the deeds).

Question 6

What is an example of a misrepresentation which was held to be an opinion suggesting a fact? Also, the same authority suggesting that the terms were unfair.

Answer 6

Avora Fine Arts Investment Lrd v Christie, Manson & Woods: a statement of opinion about the origin of the painting could only allow recision.

A misrepresentation had been made: it was clear that C not only warranted that Odalisque was by K but represented that that was its opinion; as C was giving its opinion as well as a warranty, it had impliedly represented that it had reasonable grounds for holding that opinion.

Question 7

Is it possible to warrant against making a statement of fact?

Answer 7

IFE Fund SA v Goldman Sachs: YES: here, a bank was not liable because they had assured the purchaser they were not vouching for the veracity of the advice.

Question 8

What happens if the statement is substantially correct?

Answer 8

Avon Insurance Plc v Swire Fraser: must be such that the difference in the correctness and reality would not be enough to induce the reasonable person to enter into the contracts.

Question 9

Do the parties communicated also need to be the parties to the contract?

Answer 9

Etridge, yes, or the third party becoming involved must have involved itself with notice of the misrepresentation.

Question 10

For deceit, will the misrepresentor be liable for third parties?

Answer 10

Andrews v Mockford: the representor in a deceit action must have intended the information to get passed on to B and for B to rely detrimentally.

Question 11

For negligence, will the misrepresentor be liable for third parties?

Answer 11

Smith v Bush: for a negligent misstatement it is enough for it to be reasonably foreseeable.

Question 12

How are misrepresentations assessed?

Answer 12

EA Grimstead & Son Ltd v McGarrigan: unclear if this is ‘fly on the wall’ objectivity or ‘in the shoes’ objectivity.

Question 13

Does the misrepresentation need to be material?

Answer 13

Yes, the misrepresentation needs to be material to the degree that it induced the party into entering the contract.

Spice Girls v Aprilia: materiality and the argument by the representee of reliance has the effect of producing a presumption in his favour.

Aquitaine: it can also be met by inducement into entering a contract at less favourable terms.

Question 14

To what extent must the representee have been induced to enter the contract?

Answer 14

Aquitaine v Laporte: it need not be the sole inducement in the decision to enter or the decision to accept certain terms.

Eddington v Firzmaurice: it is enough that the misrep was one of the factors leading him to enter the contract.

Question 15

Is there a duty on the representee to check to see if the information is correct for himself? What happens if he does check?

Answer 15

Redgrave v Hurd: the representation is actionable even though the representee might have checked the info for himself. Even if the Re did make a cursory investigation, this might not stop the materiality of the misrepresentation mislead him. If a material misrep, he is taken to have relied upon it.

Peekay: in this case a sophisticated and experienced investor did his own investigation, preferring not to take heed of a casual misrepresentation, and thus had not relied on it.

Question 16

What are the authorities for the concealment cases and is there any resolution on them?

Answer 16

Gordon v Selico:
The misrepresentor sold a defective house to Re, even though Re hired a surveyor he was not held to have relied as the defect had been concealed. Thus, Re could sue on deceit.

Horsfall v Thomas:
However, when the Mo sold a defective gun to Re, Re was taken not to have relied upon the sale on the basis it would have been obvious on a reasonable inspection.

It seems to square these cases it depends on how obvious the defect in the working condition of the products is.

Question 17

What happens if Ro corrects Re?

Answer 17

Assicurazioni Generali SpA v Arab Insurance: must actually come to the representee’s notice.

Peekay: Ro can get Re to sign a declaration he has read and understood a correction

Question 18

When the statement is fraudulent, does Re need to prove prove reliance?

Answer 18

Reeves v Metropolitan police: no, reliance is presumed.

Question 19

What happens if the statement becomes false after it has been made?

Answer 19

With v O’Flanagan: it seems if the Ro has notice of this development then he is under a duty to update Re.

Foodco v Boot: knowledge is the standard.

IFE v Goldman Sachs: it might be that there is a continuing representation that the party continues to believe the statement.

S2(1) of the Misrepresentation Act imposes a duty on Ro to review the veracity of his statements (stops after formation), otherwise he will lack vaid grounds in the belief.

Unclear if knowledge of reasonable knowledge are the standards.

Question 20

How do we tell if a representation is a contractual warrantee or a representation?

Answer 20

There is a multi-factoral approach which will hinge on severa different features (Business Environment Bow Lane: the test is strict)

(1) Objective appearance: Yam Seng Pte Ltd: was the Re entitled reasonable to assume it was a contractually binding statement.
(2) Importance to Re (a ‘deal breaker’). Bannerman v White: the court will consider whether the matter is crucial to Re.
(3) Obvious Importance: City & Westminster Properties v Mudd: the landlord had assured a prospective tenant that he would be free to sleep in a business premises, when in reality he couldn’t. This was an objective dealbreaker.
(4) Relative skill: dirk bentley and oscar chess, regarding relative abilities of the parties. In the former a car dealer’s statement to mileage was treated as a term. In the latter, the seller was a private vendor and the buyer was an expert in vintage cars.

Cf Oscar: ““5. When the seller states a fact which is or should be within his own knowledge and of which the buyer is ignorant, intending that the buyer should act on it and he does so, it is easy to infer a warranty. So also if the seller makes a promise about something which is or should be within his own control. If, however, the seller, when he states a fact, makes it clear that he has no knowledge of his own but has got his information elsewhere, and is merely passing it on, it is not so easy to imply a warranty.””

Question 21

What happens, when ascertaining whether something is a collateral warrantee, if both parties are equally experienced?

Answer 21

Drake v Thos: When they are equally experienced. If there is patent doubt on behalf of the Re, it is unlikely to form part of the contractual warrantee. Here, significant doubts as to the validity of a painting meant that the bueyr was unable to claim it was a term (he was gambling, or at least his agent was).

One tool to avoid these is to put an ‘entire agreement’ clause in.

Question 22

Is independent verification relavant for the warranty test?

Answer 22

Ecay v Godfrey: yes, if a party is aked to independently verify something then it is unlikely the representation is a warranty.

BUT

Schawel v Reade: if Ro asked Re not to verify the matter, this is equally relevant.

Question 23

Regarding the warrantee test, are statements as to future facts more likely to be mispreresentations?

Answer 23

Business Environment Bow Lane: No - if the statement is to a fact, it is more likely than assurances as to future forecasts or future facts to be a warrantee.

Esso Petroleum: Here the expertise of the party meant the statement concerning future forecast of business in a filling station was a collateral warranty. Unusually this related to the warrantee they had taken sufficient care in making the statement, not of the veracity of the fact.

Question 24

What role does the interval between making the statement and concluding the contract make?

Answer 24

Business Environment Bow Lane: the logner the period the more likely it will be a mere representation.

Question 25

What happens, when working out if there is a warranty, when subsequent negotiations occur?

Answer 25

Business Environment Bow Lane: if subsequent negotiations occur, such as a written contract, it is very difficult to overcome the presumption the written document contains all the terms.

Question 26

What is a good authority for collateral contracts?

Answer 26

Shanklin Pier v Detel Product: where A enters into contract C, this can provide the consideration for entering into contract B. A warranted to B about the quality of A’s paint, and B was held to have a collateral contract with A despite the fact it was X, a third party, who bought from A.

Question 27

What is the basic authority for negligent misstatements?

Answer 27

Hedley Byrne v Heller

Question 28

What are the components of the tort of deceit?

Answer 28

The tort of deceit is met whenever A makes a false statement knowingly, intending B to rely on it, or recklessly. Further, it also covers situations of ‘couldn’t care less’ becasue A needs to have a positive belief in the veracity of the statement (Derry v Peek).

Question 29

What is the measure of damages for deceit?

Answer 29

Smith v New Court: the defendant is liable for all damage directly flowing from the transaction: ie, capital loss,although it need not be foreseeable, it must have been directly caused.

This also differs from the contractual measure as the claimant cannot claim what the position would be had the representation been true.

Question 30

What are the three useful authority for the degree of loss which can be claimed for deceit?

Answer 30

Doyle v Olby: this also includes consequential loss.

This means it includes money thrown away and any loss of potential profits. This is especially beneficial for individuals whose deals were going to be ‘bad deals from the start’.

Yam Seng Pte v International Trading Corp: The question of whether P would have lost some or all the money anyway is on D, and very difficult. Legatt J held this would be an uphill struggle to prove a reasonable degree of certainty, they probably would have suffered a loss, and the amount of the loss.

Question 31

Can a lost opporunity to strike a better deal with the same defendant?

Answer 31

Clef Aquitaine v Laporte Materials: This involved the lost opportunity to get strike a better deal with the same defendant. here, P recovered the profits it would have made on better terms had the representation not been made.

Question 32

Can the damages for deceit also cover the chance of choosing a different investment or business?

Answer 32

4 Eng Ltd v Harper: P was on the fence between A or B. Awarded damages of 80% for the chance P would have bought B had it not been for the misrepresentation.

This shows it extends to the loss of a chance to acquire an alternative, particular business, and that tortious damages extend to cover the profits of liquidation if capital was accrued. However, consequential losses from the business actually acquired would be barred if the alternate sale was used, and it was deducted 20% for the chance they wouldn’t have sold to them.

Parabola Investments v Browallia Cal Ltd: These include the loss of chance for alternative investments even after the fraud is discovered. P recovered damages for capital loss, loss of profits, and the loss of profits from discovery to the trial. Eg, P was locked into the transaction - he was stuck holding them.

Question 33

How are damages for the loss of an opportunity to buy another business calculated?

Answer 33

East v Maurer: the deceit of a seller leading to the purchase of a business (hairdressers) which turned out to be unprofitable as a consequence of the defendant taking all her customers led to damages for the average earnings of the plaintiff had invested in an alternative business of the same kind.

Question 34

What is the statute covering misrepresentation?

Answer 34

The Statutory Tort (Misrepresentation) Act 1967

Question 35

What must the claimant rely on to succesfully claim for the misrepresentation act? Case and statute.

Answer 35

Misrepresentation Act 1967 s2(1)

East v Maurer: these are tortious damages

Yam Seng Pte: C must show (i) it entered into the contract, (ii) it did so after the misrepresentation, (iii) the representation was false, and (iv) the claimant suffered loss.

Question 36

What is the measure of damages under the misrepresnetation act 1967 s2(1)?

Answer 36

Royscot v Rogerson: the damages are tortious and patterned on deceit without any of the requirements in deceit. This is the so called ‘fiction of fraud’.

Yam Seng Pte: Legatt LJ said this is probably incorrect.

Roscorla
However, when dealing with a novus actus reasonable foreseeability was relevant. In this case it was reasonably foreseeable C would sell the car, and as such was not a novus actus. This was on the basis of how routine the fraudulent selling by C was.

Question 37

On whom is the burden of proof placed?

Answer 37

It is on the defendant to prove he had a reasonable ground to believe the fiction. This can produced differences when the veracity is on the edge:

Howard Maine v Ogden: this can have some serious ramifications when the issue is tight/ambiguous. Here, D had represented a barge capacity based on Lloyd’s manual (shipping bible) which turned out to be wrong. If he had looked at the papers, he would have seen the true capacity. If the burden had not been reversed, D would not have been liable.

There is also no need to show an assumption of responsibility or special relationship.

Question 38

Do mitigation and contributory neligence apply?

Answer 38

Gran Gelato: Mitigation does apply. Likewise, contributory negligence can also be applied, per Law Reform (Contributory Negligence) Act 1945.

Question 39

For recision, who does Re have to notify?

Answer 39

Usually it is the Ro, but it can be done by stating it to an authority like the police using ‘unequivocal means’ or ‘best measures’ or ‘overt means (upjohn)’. Car & Universal Finance v Caldwell

Question 40

What heads of damages can be claimed for recision?

Answer 40

Whittingdon v Seale-Hayne: (1) rent paid to D; (2) rent paid to the local authority; (3) repair work pursuant to the authority’s rules. In short, they could claim for anything which was spent pursuant to the obligations under the contract.

It did not cover consequential losses: Loss of poultry, loss of profits, medical expenses for ill manager. These did not have a correlative benefit to Ro, but could be claimed under tort.

Question 41

What are the five equitable bars to recision?

Answer 41

(1) Undue burden on the other party; (2) third party has taken an interest; (3) Re has not come with clean hands; (4) restoration is impossible; (5) statutory discretion to award damages in lieu; (6) substantial time has gone by; (7) affirmation of the contract

Question 42

What is the provision in the statute that allows the court a discretion when rescinding the contract?

Answer 42

s2(2) of the Misrepresentation Act 1967: can do so provided:

’It would be equitable to do so (and not fraudulent)’;

‘Having regard to the nature of the misrepresentation and the loss that would be caused by it if the contract were upheld’;

‘As well as to the loss that recision would cause to the other part ‘

Note, there is no defence of reasonable belief. The action seems to be compensatory (Trietal, Chitty)

Question 43

Does the right to recision have to continue existing at the time of the contract.

Answer 43

‘The Lucy’
Floods of Queensferry Ltd v Cambridgeshire CC

Seemingly, yes.

Question 44

What is the measure of damages for damages in lieu of an injunction and the standard of liability?

Answer 44

‘Thomas Witter Ltd v TBP Industries Ltd’

The liability under s2(2) need not be culpable. Contrast to s2(1) which will not work if there is a reasonable belief by the other party.

The nature of damages is not clear, but is probably such that the difference in price paid and the actual value is used.

Chitty and Trietal both support this proposition. In addition, it is likely to be the damages at the time of the sale, not subsequent devaluation. Albeit the court may choose a different date if practical.

William Sindall Plc v Cambridgeshire CC: cost of cure damages or consequential loss might be available. Evans LJ: Andrews claims this is dicta.

Question 45

What are some differences between recission and breach?

Answer 45

(1) For breach of a contract the agreement is not treated as void from the start.
(2) The innocent party can still sue for damages in respect of breaches of contract or payment obligations which predate the termination.
(3) The terminating party may himself remain liable in respect of his breaches which predate the termination.

Question 46

Can P get claims in breach and recission?

Answer 46

if the contract has been rescinded, then no (it is void ab initio). However, Andrews argues that if the contract has not been rescinded then they should be allowed to maintain both actions.

CF

Noguhton v O’Callaghan: Where P bought a racehorse Y, which had been wrongly described as horse X, having a different pedigree, the difference in price was paid on both actions.

Question 47

Can you exclude fraud using a contractual term.

Answer 47

Six Continents Hotels, rejecting the full ban from Thomas Witter

A clause which is literally wide enough to cover fraud will be deemed not to do so;

The remainder of the clause is valid, as far as it is reasonable (1967 Act, s2(1)).

Question 48

What is the statute which excludes unreasonable exlcusions for misrepresentation?

Answer 48

Misrepresentation Act 1967 s3. Unreasonable (per Unfair Contract Terms Act) exclusion or restriction of liability arising from a misrepresentation is invalid. Also, a reverse burden of proof

Question 49

What are the five types of exclusion clause, and which ones are valid?

Answer 49

Cremdean Properties: the court distinguishes between full exclusions and partial exclusions. Only the former are struck out/subjected to s3.

(1) Mere opinion clause;
(2) No representations made
(3) No reliance
(4) Entire agreement clause
(5) lack of agent’s authority

Question 50

Are entire agreement clauses valid?

Answer 50

Inntrepeneur Pub Company v East Crown Ltd: yes, because they don’t exclude liability for misprersentation damages.

Axa: however, if it is part of the standard terms of the contract it might be invalid under UCTA 1977.

Question 51

Are clauses which limit the authority of the agent of the plaintiff invalid?

Answer 51

Overbrooke Estates v Glencombe Properties Ltd: no, albeit Andrews thinks this might be too open to abuse.

Question 52

Are clauses which claim that there were ‘no representations made’ valid?

Answer 52

Springwell: no

Question 53

Are mere opinion/non-reliance clauses valid?

Answer 53

Raiffaisen (quoted in Springwell): (a) whether it is acceptable to recognise sophisticated parties ‘open-eyed’ denial of responsibility, or (b) enable s3 to apply to a draftsman’s attempt to rewrite history. This is difficult.

Avora and Springwell: both support proposition (b), perhaps because it could be covered by reasonableness.

IFE Fund SA: Toulson J held that a type 4 clause could prevent a misrepresentation arising in the first place. CoA did not deny or approve this reasoning.

Question 54

Are descriptions of goods contractual terms?

Answer 54

s13(1) SoGA 1979 - yes

Question 55

Are non-reliance clauses valid?

Answer 55

No - Springwell

Question 56

Defences to S2(1) of the Misrep Act 1967

Answer 56

Reasonable belief (on D);
Failure to mititgate loss (works for deceit too - Smith New Court)
Contributory negligence: this does not cover a duty to check (Gran gelato), 1945 act does apply for tortious action of deceit.

Question 57

What features are relevant for the s8 reasonableness under UCTA.

Answer 57

Foodco v Henry Boot:

A non-reliance clause not unreasoable under 2 3 of the misrep act on the basis that there was no imbalance in bargaining power; both had legally representation; and it permitted reliance on any reply given between the solicitors.

Question 58

What other statutory provisions might apply to misrepresentations?

Answer 58

Part 2 of the CRA Bill. If the term concernes the provision of ‘goods, digital content, or service’, the four main conditions will be: (i) good faith; (ii) significant imbalance in rights and obligations, (a) because it would heavily favour the trader, or (b) will operate asymmetrically, operating only to affect the trader; (iii) broadly so it covers pre-contractual misrepresentations; (iv) the term of norice will manifestly operate ‘to the detriment of the consumer’.

Cf Shaftsbury house v Lee - might catch a non-reliance clause.

Question 59

A half statement can constitute a misrepresentation by only providing part of the truth.

Answer 59

Curtis v Chemical Cleaning and Dyeing Co: exclusion clause represented as covering loss only for damage to beads and sequence, but it actually covered all forms of damage. Because of the misleading nature of this statement it was invalid.

Question 60

Example of reasonableness in avora: was it met on s3 of the 1967 act? Was it met, and was it covered, by the reasonbleness test in the 1977 act?

Answer 60

Both met. Warranty saying all statements were opinion and that there was no vouching for its legitimacy outside the limited warranty (returning painting).

Because there was a warranty, no question of F being left without a remedy if Odalisque proved not to be by K.

Further, C could reasonably take the position that it should not be exposed to a claim in circumstances where the likelihood was that it had been correct that Odalisque had been painted by him.

Equal Bargaining power: Moreover, while C contracted only on its own standard terms, F was a vehicle for a particularly rich man and it was under no economic imperative to deal with C if it did not wish to; F also appeared to have had some familiarity with C’s terms, and in any event could reasonably be expected to know of them.

Accordingly, the relevant parts of the conditions were not invalidated by either s.2 of the 1977 Act or s.3 of the 1967 Act and so would have served to bar F’s claims for negligence and misrepresentation

Question 61

Authority for de minimis rule and an example of a ‘no misrepresentations made’ strikeout under s3.

Answer 61

Walker v Boyle: term was unreasonable despite legal representation as it was contained in standard terms (private house selling).

Question 62

Walker v Boyle

Answer 62

Term was unreasonable despite legal representation as it was contained in standard terms (private house selling).

Question 63

Authority for the proposition that there is no misrepresentation if the other had knowledge of the truth (or it was contained in a contract)

Answer 63

Peekay “In my view, however, the terms of the FTCs were sufficient to make it clear to Mr Pawani, if he had read them, that the nature of the investment was fundamentally different from that which he had been given to understand. “

Question 64

How will the courts interpret an entire agreement clause?

Answer 64

Axa: tightly - if an interpretation can be used which avoids finding it excludes liability for misrep, then it will be used (here it used the word ‘representations’).

Question 65

Does the right to recision have to continue existing for damages in lieu?

Answer 65

Zanzibar v British Aerospace: yes, becasue of the time which had passed and the third party interest it would be unjust to order recision, thus no damages in lieu.

Also, if an award of damages is to be made under section 2, different damages might be awarded in compensation for different representations.

Further, cf s2(2) is not subject to the reasonable belief defence.

Note that this case discusses old law where Thomas Witter wipes an entire clause out if part of it excludes fraud.

Question 66

What can be claimed under s2(2)?

Answer 66

UCB Services v Thomsoason: under s2(2) detriment can be claimed. Here it was the lost opportunity to claim more damages from T, taking into account T’s financial health.

Question 67

Salt v Stratstone

Answer 67

Restitution can still be awarded of depreciation occurs and there is a long delay (ie, only found out about the misrep later).

‘Rescission was the normal remedy for misrepresentation and was prima facie available if “practical justice” could be done.”

Cf Leaf doubted, which held that if there was a long delay preventing the party suing on the contract, then they could not be better off by claiming damages in misrep as if it wasn’t a term. Arguments on depreciation also dismissed (antique chair).

Question 68

Extent of deceit damages: fraud

Answer 68

Smith v Scrimonger: fraud which inflated P’s losses and unforeseen by D allowed.

(1) the defendant must make reparation from all damage coming directly from the transaction
(2) foreseeability is irrelevant
(3) the full price paid can be recovered, minus any benefits he received resulting from the transaction
(4) a general rule is that benefits include changes in market price, but this is not to be inflexible to prevent full compensation
(5) that general rule does not apply when misrepresentation continues to operate after acquisition, inducing the claimant to retain the asset, or the claimant is locked into holding the property
(6) consequential loss is recoverable…
(7) …subject to mitigation once fraud is discovered.

Question 69

Hussey v Eels

Answer 69

cf damages as well: basically no duty to mitigate by living the subsiding house for two years. Further, their resale was not connected and could not be deducted on the grounds they were looking for occupation and were not residents themselves - got the reduction in value of what they paid and its true value (cf not the value it would have had subsidance free).

Question 70

Cleaver v Schyde

Answer 70

For reasonableness under s3, each case turns on its facts. ie eg, if the parties were represented by solicitors, varied by special conditions, and the term had a long history, it might be difficult to find unreasonableness. Those were present here, but the claimant had specifically said that it wanted updated on the planning permission and there was another term requiring notification.

Question 71

Omaso v Olgivie Grant

Answer 71

A misrep could transfer to the company of the misrepresentee despite them not being part of it.

Question 72

IFE v Goldman Sachs

Answer 72

How narrow is hedley byrne? Here was no duty of care. This is miles away from Hedley Byrne and the memoranda was clearly not any assumption of a duty. Not only was the personal representation missing, and it was made to a wide group of inchoate readers, but it also contained a clause negativing responsibility which was effective in this case.

also note, there might be a continuing representation as to the validity of material, which could get around the knowledge requirement in Foodco for subsequent falsification.

Question 73

Brown v Raphael

Answer 73

“But if the facts are not equally known to both sides, then a statement of opinion by the one who knows the facts best involves very often a statement of a material fact, for he impliedly states that he knows facts which justify his opinion.” In this instance it virtually impossible for the representee to make his own inquiry.

Question 74

William Sindall

Answer 74

Damages under s2(2) could be for expectation loss (obiter).