Misrepresentation, Recission & Bars

Question 1

Redgrave v Hurd (Requirements for Actionable Misrepresentation)

Answer 1

• Establishes the following test: In order to rescind the contract, an actionable fraudulent misrepresentation or innocent misrepresentation requires three things:
  (1) There must be a statement of fact;
  (2) the statement of fact must be false; and
  (3) the statement of false fact must have induced the innocent party into the contract.
• Establishes the following legal presumption:
  o when you are dealing with inducement, if the false statement of fact was a material statement (important statement) that was intended to induce the other party, then the court will simply presume that the party was induced, and the onus will fall on the other party (the party who made the misrepresentation) to rebut that presumption on the balance of probabilities.
  o Inducement — “I would not have entered this contract but for the false statement” or “one of the reasons as to why I entered the contract”.
• Lack of investigation into the false statements by the party rescinding the contract does not disentitle them from claiming an actionable misrepresentation.
  However, not seeming to care about a false statement can help support the argument in certain circumstances that the false statement did not induce you into the contract based on reliance.
• If you are induced to enter a contract by a false representation it is not sufficient to say “if you had used due diligence you would have found out that the statement was untrue”.
  o AKA - not ok to say “haha I fooled you and you agreed to it by signing the contract”.
• With this being said^^, If I make a statement to you that is easily verifiable and you don’t even bother to verify it, then one could make an argument that you don’t care about the truth of it and would have entered the contract regardless (were not induced by the misrepresentation).

Question 2

Smith v Land (Statement of Fact vs Opinion)

Answer 2

• General starting point — A false statement of opinion (rather than a fact) fails the test of actionable misrepresentation. You need to show it was a statement of fact rather than opinion in order to launch a claim Redgrave
  
  • Opinions are not actionable in terms of innocent representation.
  • Opinions can be actionably in fraudulent misrepresentation if you don’t actually hold/believe in that opinion and are misrepresenting the opinion stating it as a fact.
  • An opinion can be actionable as a fact when there is a monopoly of knowledge held by 1 of the parties.
  • For something to be a fact it must have actually happened before or right now, not something in the future that hasn’t happened yet.
    Future oriented statements made where someone has no belief in that statement could be actionable, but this is hard to prove.

Question 3

Kupchak v Dayson holdings (Bars to Recission)

Answer 3

Summarizes the three bars to recission, if any of these are proved then the equitable recission is not available.
(1) restitutio in integrum
o Rescission is barred — the innocent party cannot rescind the contract if the court cannot restore the parties in their fully integrity to their precontractual situation.
o This arises where the situation has changed after the contract so it becomes not practical or impossible to rescind.
o If it an innocent misrepresentation, then recission is barred
o If it is fraudulent misrepresentation, then recission is barred, but the court will give the party equitable damages in lieu of recission since we don’t to give fraudsters an equitable defence and leave the victim/plaintiff uncompensated.
(2) affirmation (or election) - AKA electing to affirm
o Essentially you discover about the false statement of fact but you don’t do anything about it.
o A party cannot have recission if they have elected to affirm the contract
o Election to affirm occurs when the contract has been formed, the innocent party discovers the false statement of fact, and notwithstanding the false statements, the innocent party decides to stay in the contract.
o Election to affirm the contract happens expressly or impliedly.
- Expressly — the innocent party tells the other party that they discovered the misrepresentation, but they affirm the contract anyways. i.e. “this hotel I bought from you sucks but I’ll keep it anyway”.
- Impliedly — the innocent party learns about the misrepresentation but does an act that has the effect of showing that the innocent party intends to affirm the contract.
§ The court will find an implied affirmation only if the intent to affirm the contract is clear and unambiguous.
□ More difficult to prove than express affirmation.
§ i.e. the action of continuing to run a hotel (keeping/using the property) despite knowing that the hotel you bought sucks.
o There are no equitable damages in lieu and no recission in the case of affirmation, regardless of whether it was fraudulent misrepresentation or innocent misrepresentation.
(3) delay (or latches)
o Deals with the passage of time, the delay of time after learning of the falsity of a claim.
o The innocent party cannot rescind the contract if:
(1) the innocent party discovers misrepresentation, but they delay in complaining and suing (i.e. waiting 1 year); and
(2) the mis representer relies on that delay by changing their position in some way
(3) they rely on the delay such that it would be unfair to order recission.
o The idea is that someone had time to take legal action but didn’t, so it’s believed that everyone was fine with the agreement, so it’s not just to suddenly take action way later when the mis representer relied upon that in some way.
o Delay will generally have to be a substantial period of time.
o If it an innocent misrepresentation, then recission is barred.
○ If it is fraudulent misrepresentation, then recission is barred, but the court will give the party equitable damages in lieu of recission.

Question 4

A