Misrepresentation: Types & Remedies Flashcards
Lecture 2
What is the different types of misrepresentation?
- Fraudulent
- Negligent
- Innocent
- Statutory
What is Fraudulent Misrepresentation?
- Where a party makes a false statement that they do not believe it is true (lying to the other party)
- Case: Derry v Peek [1889]
- Requirements: false representation made knowingly, without belief in its truth + recklessly
What is Negligent Misrepresentation?
- They believe it is true but the person who made the statement has no reasonable ground to that belief (tort link)
- Representor acting carelessly or breach of a duty of care -> committing negligence tort
- Case: Hedley Byrne v Heller [1964] {you need to prove duty of care, i.e., established through special relationships}
What is Statutory Misrepresentation? (link to Misrepresentation Act 1967, s. 2(1)
- Liability imposed for misrepresentation regardless if statement is made fraudulent or not
- Innocent party only need to prove misrepresentation unless representator can prove they have reasonable grounds to believe misrepresentation
- Case: Howard Marine…
What differences are there between statutory and common law negligent misrepresentation? (under s.2(1)
1) No need to demonstrate duty of care
2) Burden of proof is reversed
3) More damages than negligent misrepresentation
4) Only applies when a contract is formed (contractual relationship)
What is innocent misrepresentation?
- Neither fraudulent nor negligent
- Honestly believes that the statement is true and has reasonable grounds for that belief
What is rescission? (remedy for misrepresentation)
- Setting aside or “undoing” the contract (retrospectively and prospectively)
- Pros: X free from obligations under contract in future
- Retro: put X back into position before he entered the contract (e.g., compensating financial loss)
An actionable misrepresentation renders a contract voidable and NOT void. What is the difference between the two terms?
- Voidable contract = stays a valid contract until voided by the innocent party
- Void contract = setting aside ab initio (from the beginning) and generally produces no legal effects whatsoever
What is the significance of rescission as a remedy for misrepresentation?
- Available for representee for all types of misrepresentation
- Makes contract voidable, not void
- Two choices = rescind contract + affirm contract (both to seek damages)
What are the limitations of using rescission?
- Affirmation
- Lapse of time (non-fraudulent) {Leaf v International Galleres [1950]}
- Third party rights (acquires rights for consideration if they are in good faith)
What are damages? (remedy for misrepresentation)
- Remedy based on tort law or statute (not same as damages for breach of contract)
- Depends on type of misrepresentation and the mental state of the representor when he made the misrepresentation
Provide a summary of the remedies for fraudulent and negligent misrepresentation.
- Fraudulent: available through tort of deceit {Doyle v Olby [1969]}
- Negligent: misrepresentor committed tort and damages through tort of negligent misstatement {The Wagon Mound No.1 [1961]
Provide a summary of the remedies for statutory and innocent misrepresentation.
- Statutory: assessed in same way as damages for fraudulent misrepresentation (s.2(1) of Misrepresentation Act 1967)
- Innocent: damages not available at common law (severely limited to award this damage)
Can you exclude liability for misrepresentation?
- Common law: person could exclude or restrict liability for non-fraudulent
- S.3(1) of the Misrepresenation Act 1967 –> reasonableness test attempts to exclude misrepresentation liability by a contractual exclusion
- Does not apply for consumers, but test of fairness of terms used
- Case: First Tower Trustees Ltd v CDS Ltd (2018)
What happens if misrepresentation is incorporated as a term of the contract?
- If it becomes a term, it could be a breach of contract
[could be advantageous for innocent party in situations where breach does not entitle them to terminate contract]
