Misrepresentation & Duress

Question 1

Define misrepresentation.

Answer 1

A misrepresentation is an untrue statement of fact made by one party to a contract to the other party, at or before the time the contract was made, which induced the other party to enter into the contract.

Question 2

What are the 5 elements of (legal requirements for) misrepresentation?

Answer 2

1. There must be a statement concerning some fact and not law, intention, opinion or “sales talk”.
2. The statement must be false.
3. The statement must be made by one party to the contract to the other party to the contract. The essence is that one party must mislead the other party.
4. It must happen at the time of, or before, the contract is entered into.
5. The misrepresentation must have induced the other party into the contract. If the other party did not rely on the untrue statement, he has not been induced. If the person attempts to check the truth of what has been said, he clearly has not relied on the untrue statement.

Question 3

Does silence amount to misrepresentation?

Answer 3

Silence does not amount to misrepresentation. There is no general duty for one party to disclose material facts to the other party before entering into a contract with that other party.

However, gestures, smiles, and nods can amount to a statement and if the other elements (legal requirements) are proved, such silent modes of communication could amount to a misrepresentation.

Question 4

What kind of situations does the law recognize that there is a duty to speak up?

Answer 4

The law recognizes certain situations where there is a duty to speak up. In such situations, a person’s failure to disclose information that he knows (i.e silence), would amount to a statement of the relevant state of affairs. These situations are as follows:

(a) There is a good faith relationship between the parties.
(b) The contract is an “utmost good faith” contract that requires the party to disclose all material facts. These are usually contracts where one party is in a strong position to know the facts and the other party is in a weak position.
(c) The failure to disclose information distorts the truth:

[i] where half-truths are told

[ii] where there has been a change of circumstances e.g during negotiations, the statement made was true. However, later on, when parties are about to enter into or start to perform the contract, the statement is no longer true.

Question 5

Explain fraudulent misrepresentation.

Answer 5

Fraudulent Misrepresentation occurs if the maker of the statement knows that what he has said is false, he will be liable for fraud. The injured party may rescind the contract and also sue for damages.

Question 6

Explain negligent misrepresentation.

Answer 6

Negligent misrepresentation occurs if the maker of the false statement has no reasonable grounds for believing the statement to be true, he will be liable for negligent misrepresentation. Damages may be awarded either for the tort of negligence or under the Misrepresentation Act.

The judge may award rescission as well as damages.

Question 7

Explain innocent misrepresentation.

Answer 7

Innocent misrepresentation occurs if the maker of a false statement had reasonable grounds to believe that it was true, not only when it was made but also when the contract was entered into, he will be liable for innocent misrepresentation. The basic remedy is rescission of the contract. Under the Misrepresentation Act, the court may in its discretion award damages instead.

Question 8

What is duress?

Answer 8

Duress can take the form of:

(a) Actual or threatened physical violence to a person or his immediate family. The scope of duress has recently widened to include actual or threatened physical violence to a person’s property.
(b) Economic or commercial pressure involving:

[i] A coercion or compulsion overbearing the will of the victim; and

[ii] unlawful pressure