Misrepresentation Flashcards
What is a misrepresentation?
Explain and give reference to the leading case
A misrepresentation is an untrue statement of facts
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Curtis v Chemical Cleaning and Dyeing Co (1951) - the plaintiff gave her dress to the cleaning company and was asked to sign a receipt. When she asked what it was for, the employee stated it was to exclude liability in case there was a problem with the beads. Curtis signed. Dress was stained in the end. Court held the company had misrepresented the exclusion clause and where thus not able to rely on it.
What are the effects to a contract in which a misrepresentation has taken place, and what are the potential remedies?
A contract in which a misrepresentation has taken place is rendered voidable - the representee (“victim of the misrepresentation”) may choose whether they want to void the contract
Potential remedies for misrepresentation are:
rescission, damages or both
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Available remedies depend on the category of misrepresentation
Can conduct amount to misrepresentation and what is understood by deliberate concealment?
Include and explain the leading case in your answer.
Conduct can amount to misrepresentation. Deliberate Concealment is found where an offeror (e.g. seller) deliberately conceals a defect to take advantage of the cluelessness of the offeree.
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Gordon v Selico (1986) - Plaintiff Gordon viewed a flat which he later bought. The company Selico knew the apartment was in bad condition and ordered painters to cover-up the dry rot. Court said the action to cover up the dry rot amounted to deliberate concealment and thus Selico misrepresented the true condition of the flat.
Note that in this case even though the misrepresentor was silent his conduct amounted to misrepresentation.
Can silence amount to misrepresentation and what is meant by “non-disclosure”?
Explain and give reference to the leading case
Silence usually does not amount to misrepresentation
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Simons et al v Magnolia Properties Ltd (2007) - Plaintiff Simons wanted to lease a property to open a restaurant. They expected the property to have a gas supply to attach their cooking equipment and mentioned they would need such to run their restaurant. Magnolia Properties made no representation regarding the gas. Simons felt confident as they knew there was a restaurant previously and went on with the lease. Subsequently it was not possible to store gas in the property and the plaintiffs sued Magnolia. The court held that there was no misrepresentation as Magnolia never made any representation as to gas supply.
Legal Principle behind decision: caveat emptor = let the buyer beware
opposed to uberrima fides = utmost good faith (all parties must fully declare all facts in good faith) - often applies to insurance contracts
Explain whether or why Misrepresentation would only relate to past or existing fact and support your answer by case law.
Misrepresentation must relate to a past or existing fact. It can be difficult to identify whether what is being discussed relates to a past or existing fact. A misrepresentation can be made about an intention
Edgington v Fitzmaurice (1885) - company issued debenture bonds to, in fact, pay off debts but claimed they raised money to buy assets to expand the business. A buyer lost money and sued for misrepresentation. Court held, at the time they issued the debenture bonds they misrepresented their real intention. Concluding fact: Company has never represented the true intention.
Similarly: Insurance Company of the West Indies Ltd v Graham (2010) - Ms Graham misrepresented information as to the real use of her car.
In Contrast:
Chao San San and another v Worldpart Industrial Ltd (2003) - Property Developer offered appartments while they were still being developed and published a brochure which claimed certain amenities to come with the development. Some of the amenities, however, were never built. Court held there was no misrepresentation because the developer had the genuine belief at the time of the statement, that the amenities would be built and could prove that they applied to build the amenities which were thus turned down.
Can an opinion amount to misrepresentation of a past or existing fact?
Explain and name the leading case
An opinion can only amount to misrepresentation if the representor has expertise over the fact he represents.
Bisset v Wilkinson (1972) - Mr Bisset wanted to buy farmland which was never used for sheep farming and asked Mr. Wilkinson how many sheep would he think the farmland would fit. The defendant had no knowledge in the sector but thought it could hold 2000 sheep which turned out incorrect. The Court held it was not misrepresentation. Mr. Wilkinson only expressed an opinion and had no expertise in sheep farming.
In Contrast:
Esso Petroleum Co Ltd v Mardon (1976) - Mr Mardon wanted to buy a petrol station from Esso which they represented to sell 2000 gallons of petrol per annum which turned out to be untrue. Although it was a statement of opinion Esso had the knowledge to know better and the court held it was a case of misrepresentation.
Can statements about the law amount to misrepresentation?
Explain and support your answer with case law
Since Kleinwort Benson v Lincoln County Council (1999) statements about the law can amount to misrepresentation.
A better case to illustrate this is Pankhania v Hackney LBC (2002):
Pankhania purchased property believing tenants were merely licensees and could be terminated within 3 months notice. Hackney LBC provided that information (statement of law). However, tenants were protected under Landlords and Tenant Act. Court held statement was misrepresentation as to law.
Hence, statements as to law can amount to misrepresentations.
Must a statement be false to constitute misrepresentation?
Explain and support your answer with case law
A misrepresentation must be false but sometimes we can not be sure.
Dimmock v Hallett (1886) - sale of farm, seller knew the tenants would leave but said there were tenants. MISREPRESENTATION
Gordon v Selico (1986) - deliberate concealment, seller knew the apartment was in bad condition, thus his representation of the condition was false. MISREPRESENTATION
Spice Girls Ltd v Aprilia World Service BV (2002) - Aprilia had an advertisement contract with the spice girls band. One spice girl left the band and Aprilia refused to pay for the advertisement. In an autobiography that was published in the meantime, Geri - the member who had left the band - wrote that she told the others about her intention to leave the band (this was before the advertisement contract). Court held this was concealment and thus a misrepresentation.
Would a statement about a fact which was correct at the time but the circumstances changed until the conclusion of the contract amount to misrepresentation?
Explain and make use of case law
A statement about a fact which changed until conclusion of the contract and was not corrected amounts to misrepresentation
With v O’Flanagan (1936) - O’Flanagan sold his medical practice to Mr With. At the start of negotiations the defendant stated his practice had takings of 2000 Pound a year which was true at the time the statement was made. Before conclusion of the contract this number changed drastically and Mr O’Flanagan failed to disclose this. Mr With sued O’Flanagan.
This amounted to actionable misrepresentation because the statement continues to represent until the formation of the contract.
- Must a false statement induce the representee to enter into the contract to amount to misrepresentation?
- What would a statement be rated as by court if it was false but did not induce the representee to enter into the contract?
The false statement must induce the representee to enter into the contract to amount to misrepresentation.
Redgrave v Hurd (1880) - Mr Redgrave induced Mr Hurd to buy into his lawfirm and claimed it would generate earnings of 300 Pounds per year. He offered Mr Hurd to have a look at the financial statements to verify the numbers but Mr Hurd believed him and signed the contract. Later Mr Hurd found out it earned only 200 Pounds and did not perform his promise. Redgrave sued for specific performance and Hurd claimed there had been a misrepresentation which the court in second instance supported. The untrue statement of fact induced Mr Hurd to engage in the contract.
Similar was Edgington v Fitzmaurice (1885) - the statement that the money would be used to buy assets for the company was held “a reason” for Mr Edgington to buy the bonds. (one false reason is enough to amount to misrepresentation)
In Comparison:
Attwood v Small (1838) - Attwood purchased a mine from Small and relied on his own experts to examine whether the mine produced the output Small stated. The output was less and the court held that Small’s statement did not amount to misrepresentation because Attwood relied on his experts.
Re: Northumberland District Banking Co. ex parte Bigge (1858) - company had issued false financial statements in the past but plaintiff failed to prove he had seen or read them before engaging in the contract. The court held, because the false statements did not induce him to buy the shares and therefore they did not amount to misrepresentation.
What types of misrepresentation exist?
Since 1967 Misrepresentation Act: Fraudulent, negligent or innocent
Prior to 1963 misrepresentations were only divided in fraudulent or non-fraudulent ones.
What is fraudulent misrepresentation?
Explain and mention case law
Fraudulent misrepresentation
A false statement was made if the representor knew it to be false, had no belief in its truth, or was reckless in the sense of not caring whether it was true or false - Derry v Peek (1889)
Tramways company published a brochure stating they had a license to operate steam trams which was incorrect but they believed to receive the license anytime soon. Shareholders claimed misrepresentation. Court held as the company believed they would receive the license there was no misrepresentation. Thus the court confirms by obiter dicta that there is misrepresentation where a representor knows a statement to be false
What is negligent misrepresentation?
Explain and mention case law
A negligent misrepresentation is a false statement made in belief of it’s correctness without reasonable grounds for that belief
Hedley Byrne v Heller and Partners Ltd (1963)
A false statement was given by a bank as to the creditworthiness of a company due to negligence. The bank, however, expressed this under the proviso, that they would not take any liability for statements about third-parties. Therefore the bank was not held liable. BUT: By obiter the court held, had the bank not made the proviso, the bank would have been found liable for the negligent statement.
The statement made by the employee of Esso in Esso Petroleum v Mardon (1976) also believed the 2000-gallon turnover of petrol to be true but he had no reasonable grounds as to this belief.
What is an innocent misrepresentation?
Explain and mention case law
An innocent misrepresentation is a false statement that was made by a representor who believed it to be true and had reasonable grounds to believe it to be true at least until the contract is concluded
Explain the available remedies and how they are applied when a misrepresentation is found.
Consider the remedial differences or difficulties that may arise between the Misrepresentation Act and the common law
Use case law to support your answer
Fraudulent: Rescission and Damages are available - East v Maurer (1990) - Hairsalon was sold to East by Maurer. Maurer told East he had no intetention of reopening a new hair salon. He knew this was untrue. East was able to recover for both the actual and consequential loss.
Negligent: Rescission and Damages are available - Esso Petroleum Co Ltd v Mardon (1976). Courts can order damages instead of rescission
Innocent: Rescission OR Damages (under Misrepresentation Act 1967) Courts can also order damages instead of rescission
Misrepresentation Act vs common law
Note: The burden of proof under the Misrepresentation act lies on the representor who has to proof he had reasonable grounds to believe his statement as opposed to the burden of proof lying on the representee having to proof the representor had no reasonable grounds to believe his statement under the common law.
How long can a claim for rescission or damages be made after the misrepresentation?
Support your answer with case law
It must be made within reasonable time.
E.g. Leaf v International Galleries (1950) - Leaf bought a painting which, as the Gallery stated, was painted by a famous painter J. Constable. He wanted to sell it 5 years after and was told the statement was false. he claimed rescission. Court held even though the false statement was fundamental it was not severe enough to void the contract after such a significant amount of time that had lapsed.
What role do the efforts to rescind, after a misrepresentation is noticed by the representee, play in terms of remedies?
Support your answer by case law
A representee must prove that he has taken reasonable efforts to rescind from the contract as soon as he notices the misrepresentation - Car and Universal Finance Ltd v Caldwell (1965) (innocent third-party Case) -
Caldwell sold his car to a crook who gave him a false check. Mr Caldwell noticed this and notified the police immediately. Crook subsequently sold the car to innocent third-party. Court held: since Mr Caldwell immediately did everything possible to rescind from the contract with the crook by informing police. Hence, the contract between the crook and the third-party was invalidated. Thus Caldwell got his car back (rescission)
Can an original contract which involved a misrepresentation be rescined after a second, subsequent agreed contract about the same or similar subject matter was affirmed?
Use case law to support your answer
A good example to illustrate this is - Long v Lloyd (1958) - Mr Long bought a truck which, according to Mr Lloyd, was in exceptional condition. Later it turned out it was in bad condition and they agreed to fix a certain part of the truck and share the cost. Mr Long agreed. When he got the truck back the second time the truck still had other flaws. Long sued for misrepresentation and the court held that through the second, subsequent the original contract was affirmed. Thus the representee cannot rescind it.
