Part A: Types Of Misrepresentation Flashcards
What are the three types of misrepresentation?
- Fraudulent (common law - Derry v Peek)
- Negligent (s2(1) Misrepresentation Act 1967
- Innocent (s2(2) Misrepresentation Act 1967
The Misrepresentation Act 1967 improved remedies
What is fraudulent misrepresentation?
It is common law and the leading case is Derry v Peek.
Tramway company stated in its prospectus that it had permission to use steam instead horsepower.
Had not received permission.
Held not to be fraudulent as the company thought the permission was a formality.
What are the remedies for fraudulent misrepresentation?
Injured party can sue for damages and / or seek rescission of contract.
Rescission: puts the parties back in a position they were in before contract was made:
Damages for fraudulent: not awarded for breach but for the tort (wronged). Aims to put injured party in a position they would have been in but for misrepresentation.
Potentillas, it means that the claimant can recover all damages which resulted in fraudulent misrepresentation - as long as it can be shown that misrepresentation caused the loss claimed for.
When can the remedies for fraudulent misrepresentation be lost?
- Affirmation
The party who is entitled to rescind, by word or conduct, makes clear they want to continue with contract.
CASE: Edwards v Ashik
Representee learnt of fraud and still used the premises - however, held that denuding a letter of reserving the right to bring a claim for fraudulent misrepresentation was enough to show the contract was not affirmed.
- Lapse of Time between fraud being discovered and rescission being sought
CASE: Salt v Stratstone Specialist
Held a claim would only be bar if “inequitable to grant rescission in circumstances”
- Parties can’t be restored to original position
E.g. goods have been consumed - Third party acquisition of rights
If innocent party has acquired rights in subject matter of contract
CASE: Crystal Palace v Dowie
Rescission refused because effect of rescission would have returned defendant to manager of the club which would adversely affect the club that had subsequently employed him.
What is negligent misrepresentation?
Before the MA 1967 - common law only recognised fraudulent and innocent misrepresentation.
The act spilt innocent misrepresentation into two categories: innocent and negligent.
Claims for negligent misrepresentation are made under s2(1) of MA 1967:
- representee does not need to establish duty of care
- the representor must show “on the balance of probabilities, that there statement was not negligent”
- once party has proved that there has been misrepresentation - the person making misrepresentation will be liable to pay damages - unless they have reasonable grounds to believe / did believe the facts to be true.
CASE: Howard Marine v A Ogden
CASE: Howard Marine v A Ogden
(Negligent misrepresentation)
Defendant hired barge from claimant.
Claimants manager told defendant how much the barge could carry - basing figures off register
Register was wrong and the correct figure given in shipping documents.
Defendant discoverer and stopped paying.
Claimant sued.
Held claimant made negligent misrepresentation as the manager had no reasonable grounds for relying on register rather than shipping documents.
What are the remedies for negligent misrepresentation?
Either damages and / or rescission.
Damages: s2(1) MA 1967
CASE: Royscot v Rogerson
Confirmed that same measures of damages will apply for fraudulent and negligent misrepresentation.
Rescission: may fault in some circumstances such as lapse of time bar to rescission (date of contract)
Usually, if the representee should have discoverer negligent misrepresentation before he did so - right to rescind will be lost.
CASE: Leaf v International Galleries
Claimant found that painting was a fake 5 years later and tried to avoid contract.
Held contract was voidable but a reasonable representee would not have waiting 5 years - right to rescind contract was lost.
What is innocent misrepresentation?
Historically, innocent misrepresentation was any non-fraudulent misrepresentation.
Since MA 1967 - innocent misrepresentation is not it’s own category.
What are the remedies for innocent misrepresentation?
Traditionally, only rescission available.
Now, under s2(2) MA 1967 - the courts may award damages in lieu (in place) of rescission.
It is entirely the courts discretion, the MA 1967 instructs them to consider:
“That it would be equitable to do so, having regard to the nature of the misrepresentation and the loss they would be caused by it if the contract was upheld, as well as to the loss that rescission would cause to the other party”
S2(4) MA 1967 - states that consumers cannot be compensated twice for the same thing.
