Misrepresentation Flashcards
What is misrepresentation R8
A misrepresentation is a false statement which induces (persuades) the victim to enter the contract.
If these 2 criteria are met (it was false, and it did inducer the other side) then the victim can rescind/end the contract and may be able to claim damages as well.
What are the stages of misrepresentation R8
Was there a false statement.
Did it induce the other party into the contract.
What kind of misrepresentation was it (there are 4 kinds).
What remedies can they claim.
Statements that might not be seen as fact R8
Opinion is not usually a fact, unless the opinion is from an expert.
Statements about what you are going to do in the future are not usually seen as fact.
Silence is not usually seen as fact (keeping quiet about a possible problem with the contract).
Cases on opinion R8
Filler
Bisset V Wilkinson (1927) R8
A seller of a farm falsely said he thought it would hold 2000 sheep. This was not a statement of fact, it was opinion and not a misrepresentation. The farm had never been used for sheep farming before and the seller wasn’t an expert.
Esso V Marden (1976) R8
Esso estimated that a garage being built would sell 900,000 litres of petrol a year. The local authority changed the planning permission for the garage which made it less visible to drivers. Esso’s experts said that this would not make a difference to sales. In fact in did and when it started to trade sales were only 250,000 litres a year. Because Esso were experts in this field the statement was misrepresentation. The case arose because Esso had loaned Marden money to finance the garage and were suing to enforce the loan. Marden successful counter-claimed in misrepresentation.
Case on intention R8
Filler
Current intention R8
Edgington V Fitzmaurice 1885
Directors of a company advertised for people to invest in the company. They said the money was to expand the company. In fact the money was to pay off company debts. This was held to be a statement of fact because it was their immediate intention to pay the debts, so they were liable in misrepresentation to the investors.
Future intention R8
Kleinwort Benson V Malaysia Mining
A parent company said they would ensure that their subsidiary would ‘at all times be in a position to meet its debts.’ Because of this the bank lent the subsidiary £6m. The parent company later changed its policy towards the subsidiary and was not prepared to pay any debts regardless arose. The subsidiary went bankrupt and couldn’t pay the £6m. The bank sued the parent company but there was no misrepresentation because the statement was true when they said it.
Cases on silence R8
Filler
Is there an obligation to disclose anything bad about a contract R8
In general there is no obligation to disclose anything bad about a contract.
Fletcher V Kroll 1873 - A women applied for a job as a governess (private home tutor), she didn’t disclose that she had previously been married. If she had she probably wouldn’t have got the job. The court said she didn’t have a duty to disclose the information, if the employer wanted to know this they should have asked. There are two exceptions to this rule.
What are the two exceptions R8
Changing circumstances and insurance.
Changing circumstances R8
If you have given correct information but then things change and the information becomes false you must update the other party.
With V O’Flanagan (1936)
Negotiations for the sale of a doctors practice were based on patient figures for the previous two years. Four months later the sale went ahead.
During the four months the selling doctor had been ill and lost nearly all his patients, the practise was now virtually worthless.
Held: This change should have been communicated and non disclosure of the change of circumstances was a misrepresentation.
Insurance R8
In insurance contracts are described as being of utmost good faith, this means there is a duty to tell the insurer any facts that may influence the amount of risk.
For example if you were taking out life insurance, and you had a serious illness that could affect your life expectancy, not telling the insurance company would be a misrepresentation. If you died the insurance would not have to pay the money.
IMG V Simmonds (2003)
IMG organised an international cricket game between India and Pakistan. Simmonds agreed to insure the event. IMG didn’t tell Simmonds that there were rumours of a terrorist attack at the game.
Held: They should have disclosed the rumours to the insurance company, so the policy was void and they were unable to claim when the game had to be cancelled.
How have the rules on silence misrepresentation changed R8
The rule of silence in insurance contracts was seen as harsh on consumers as they would be unlikely to know the law and realise that they had to give information, even if the insurance company didn’t ask for it.
So for consumer insurance only, the rules have now changed, in the Consumer Insurance (Disclosure and Representations) Act 2012.
If the consumer didn’t realise they should have disclosed information, the insurance is still valid but any pay-out is reduced by the proportion the insurance company undercharged.
If the consumer has deliberately lied, the insurance company can avoid the contract and keep any instalments paid.
