Misrepresentations Flashcards
What is a misrepresentation?
Usually it is a statement of fact, rather than a contractual promise, which induced the other party to enter the contract.
What territory does misrepresentation fall under?
Falls into the territory regulated by the law of tort. This raises questions such as, whether the misrepresentation was made fraudulently or negligently.
What is fraudulent misrepresentation?
When a person makes a false statement which he knows is not true and has no belief in its truth, or which he makes recklessly, not caring whether it is true or not (Derry v Peek, 1889).
What is negligent misrepresentation?
When a person makes a false statement which he may honestly believe to be true but without reasonable grounds for believing it to be true.
What are voidable contracts?
These are best thought of as valid but damaged contracts; the courts have decided that there is a defect in the contract (i.e. in the case of misrepresentation, that the claimant was induced to enter into the contract by a false statement) and so the claimant is given the option to rescind the contract or affirm it and carry on as normal.
What kind of contract is misrepresentation?
A voidable contract.
What is recission?
A remedy that allows the parties to unwind the contract. Benefits transferred between the parties are returned to the original party. The aim is to put the parties in the position they were in before the contract.
What are damages?
Damages for breach of contract are aimed at putting the claimant in the position as though the contract had been performed. In contrast, tortious damages are aimed at putting the claimant in the position as though the tort had not been committed.
What is avoid?
Executory contracts (contracts where neither party has performed) may be avoided for misrepresentation. It is less appropriate (although not incorrect) to talk of rescission here because there are no benefits to be returned. Avoiding a contract for misrepresentation is a slightly different situation to a contract which is void ab initio (void from the start).
What is a false statement?
-Of existing or past fact.
-Made by one party to the other.
-Induces contract.
Is there a duty to speak up and disclose the facts?
Silence and non-disclosure usually doesn’t give rise to liability.
What are the exceptions, where the party must speak up?
-Insurance contracts where the contract is said to be uberrimae fidei, i.e. to require the ‘utmost good faith’, and therefore there is a duty to disclose material facts.
-With v O’Flanagan (1936): A duty to disclose the changed facts. Yet unlikely bound by this duty if they expressly stated this at the beginning of the contract.
Does the failure to disclose facts count as fraudulent misrepresentation?
The Court of Appeal in IFE Fund SA v Goldman Sachs International recognized, s.2(1) of the Misrepresentation Act 1967 applies, and this gives a right to damages irrespective of fraud unless the representor ‘did believe up to the time the contract was made that the facts represented were true’ so the maker of a statement in a case like With v O’Flanagan would be liable for damages under s.2(1) anyway.
What is an example of statements implied by conduct?
A person who purchases goods by cheque impliedly represents (even if nothing is said) that the cheque is a valid order for the amount stated on it, which is not true and thus a misrepresentation if the representor knows, for example, that the cheque is going to bounce.
How can one statement imply another?
May imply that there are no other facts known to the speaker which make the statement misleading.
What is the land example of one statement implying another?
A vendor of land said that all the farms on the land were fully let. The vendor falsely impliedly represented that he knew of no other facts which made that statement misleading (he actually knew that the tenants had given notice to quit—hence the half-truth; the farms were currently fully let, and so he had not lied, but the tenants would soon be moving).
What is the example of one statement implying another in the change of circumstance rule?
This rule is from With v O’Flanagan and the Dimmock v Hallet rule about partial disclosure/half-truths were both brought very much up to date in the Court of Appeal case of Spice Girls Ltd v Aprilia World Service (2002).
What must factual statements be distinguished from?
○ ‘Mere puffs’
○ Statements of genuine belief or opinion.
○ Statements as to the future including statements of intention
-Traditionally at least, from statements of law.
Why must factual statements be distinguished from the above?
-Facts are either true or untrue at the time of making the statement.
-A party is only justified in relying on factual statements and should not be able to complain about misplaced reliance on honestly and reasonably held opinions and beliefs, etc.
What must be asked when distinguishing a fact from opinion?
If the statement was reasonable to be relied upon.
Can a misrepresentation be a wilfully misrepresentation of the law?
Yes, this has always constituted as a misrepresentation.
What is not a misrepresentation of fact?
Non fraudulent misrepresentations of law.
What was dismantled in the House of Lords in Kleinwort Benson v Lincoln CC (1999)?
The distinction between fact and law in relation to mistaken payments, have led commentators to suggest that the distinction between fact and law in relation to misrepresentation should also be abolished.
What is an example of the objective appearance of what one person’s conduct will convey to another.
An example is if A makes a misrepresentation to B which A knows will be (or has been) passed on to C and on the faith of which C then contracts with A, A may be liable as though A had directly misrepresented the fact to C.
What is included in the one misrepresenting their conduct to another?
-This includes statements made by their agents.
-A statement made by someone who is definitely not a party to the contract in any sense may still be actionable under the Hedley Byrne principle
What must happen for there to be a misrepresentation?
-The representee must have relied on the statement.
-This reliance must be justified.
-The reliance must have taken place.
What is the solution for if you are faced with a problem where the representor is wholly innocent and the representee is negligent in failing to check?
It may be more just to conclude that rescission should not be available.
What is the solution for if the representor is negligent and damages are being claimed, as now they could be?
The negligence of the misrepresentee might be a ground for reducing them under the Law Reform (Contributory Negligence) Act 1945
