Part A: Misrepresentation

Question 1

What is the definition for misrepresentation?

Answer 1

It is a false statement of fact or law, made by one party to another, which is intended to induce or which does induce, the other party to enter into contract by their reliance of statement.

If one party has been misled - the contract is voidable and they can claim damages.

Question 2

What are the three types of misrepresentation?

Answer 2

1. Innocent misrepresentation
2. Negligent misrepresentation
3. Fraudulent misrepresentation

Question 3

What are the three requirements for establishing misrepresentation?

Answer 3

1. A statement of fact or law
2. Non-disclosure
3. Inducement

Question 4

What does “a statement of fact or law” mean when establishing misrepresentation?

Answer 4

Originally, misrepresentation was false statement of fact.

Since Pankina v Hackney London - false statements of law can be actionable as misrepresentation.

Statements can be words or conduct.

Question 5

What matters are not usually misrepresentation in “a statement of fact or law”?

Answer 5

1. Statements of opinions
   CASE: Bassett v Wilkinson - seller’s statement they land would house 2000 sheep was held to be an opinion as he had never used it for that purpose.
   Exception - if the person making an opinion is in the best place to know if it was true (statement of fact)
   CASE: Shemlow v Butler - held that a property developer incorrectly valuing a property was statement of fact.
2. Statement of intention
   Exception - unless you state intention to do something that you do not intend to do.
   CASE: Edgington v Fitzmaunce - company issued advert that investors were needed to invest - actually needed to pay debts
3. Extravagant adverts / mere puff
   Not misrepresentation unless facts and figures are used.
   Assumed that statements are not intended to be used as binding or relied upon.

Question 6

What does “non-disclosure” mean when establishing misrepresentation?

Answer 6

Silence is not misrepresentation.

There is no obligation to disclose relevant facts unless a party specifically enquiries.

Maxim “caveat emptor” - means the buyer has responsibility about finding out about goods before entering contract.

This is subject to limitations in CRA 2015 and SGA 1979.

CASE: Sykes v Taylor Rose
Held no misrepresentation when seller of house failed to voluntarily disclose the fact that property had been a scene of a murder.

Question 7

In relation to “non-disclosure”, what are the exception situations where a party is obliged to disclose facts?

Answer 7

1. One party holds “half truth” which will give false impression to other party.

CASE: Nottingham Patent v Butler
Solicitor told buyer that they were not aware of any restrictive convents but didn’t add that he had not checked. Held to be misrepresentation.

2. If statement made in negotiation is accurate but then circumstances change before contract agreed - must be disclosed

CASE: With v Flanagan
Held to be misrepresentation when pre-contract terms said that GP practise was worth X amount, which had deceased at time of signing.

3. Contract imposing obligation on party to reveal all relevant facts - even if not asked.
   Failure to disclosure = contract voidable
   Common with insurance contracts - must answer all questions truthfully and inform of any important facts
4. Where the parties have a trust and confidence relationship (e.g client and lawyer)
5. In terms of businesses - must show there was a voluntary assumption of responsibility to disclose. If none - no duty to disclose.
6. Regulation 6 Consumer Protection from Unfair Trading Regs 2008
   Important restriction on caveat emptor principle.
   Provides that businesses must not engage in any practise which omits or hides material information from consumer.
   A trader who breaches - commits criminal offence.

Question 8

What does “inducement” mean when establishing misrepresentation?

Answer 8

The representor must intend that the false statement will induce the other party to enter into contract AND the false statement must induce the representee to enter contract.

The rules of inducement depend on the type of misrepresentation.

Question 9

What are the rules of inducement (depending on the different types of misrepresentation)?

Answer 9

1. Cases of negligence or innocent misrepresentation

Representee needs to show “but for” the misrepresentation - they would not have entered contract (CASE: BV Neder-landse v Rembrandt)

Exception - if the representee was unaware of false statement at the time, knew about the false statement but decided to enter anyway or if it would not be reasonable to rely on the statement.

2. If representee makes no effect to check truth of the statement - generally sue for misrepresentation if untrue.
   Behaviour shows reliance on statement and clear evidence of inducement. But must have been reasonable to rely on it.
3. Case of fraudulent misrepresentation

The representee does not need to met “but for” test.
Claim will succeed if claimant can show they were “influenced” by misrepresentation
Representee has burden of proving that they were “materially induced” by fraud but gain the benefit of “presumption of inducement”

“Presumption of inducement” is a reputable presumption that the fraud was a material inducement that persuaded the representee to enter contract.