Unit 7 - False Preliminary Statements and Mistakes

Question 1

what does S3 of the Misrepresentation Act 1967 provide?

Answer 1

… any clause in a non-consumer contract which purports to exclude or restrict liability for misrepresentation will only be upheld if it satisfies the reasonableness test set out in S11 of the Unfair Contract Terms Act (UCTA) 1977

• OR when one party deals on the other party’s written standard terms, it is only possible to exclude liability for breach of an express term if it is reasonable to do so (UCTA 1977 S3)

Question 2

what relevant points will the courts consider when distinguishing between terms and representations

Answer 2

• Whether one party had greater skill or knowledge of the subject matter (Oscar Chess Ltd v Williams [1957])
• Whether a statement made verbally was repeated in a written contract before it was agreed. (Birch v Paramount Estates the seller’s oral promise was not repeated in the written contract but the court still decided it was a term of the contract - was partly written and partly oral contract. )
• Whether the recipient of the statement made clear it was of vital importance. ( Bannerman v White (1861) - buyer of hope asked if the plants had been treated with sulphur, adding that if they had they wouldn’t even ask the price - seller assured buyer, sulphur hadn’t been used - this assurance was held to be a term. )
• Whether the statement maker invited the other party to verify it. ( tells the buyer not to bother with a survey, this implies something about the quality of the goods being a term - Authority Schawel v Reade [1913] )
• Whether there was a lapse of time between the statement being made and the contract being formed. (longer gap, more likely to be rep, Routledge v McKay [1954])

Question 3

What constitutes a misrepresentation?

Answer 3

definition is technical but basically: a false statement of fact made by one contracting party to the other before the contract was made and which was one of the factors which induced the other party to enter into the contract.

• may be oral, written or conduct (Spice Girls v Aprilia World Service BV [2000])
• conduct must be distinguished from silence EXCEPT: 1. Where there is a fiduciary relationship between the parties eg solicitor and client or trustee and beneficiary 2. Where the contract is one of the utmost good faith (eg an insurance contract) 3. Where there has been a half-truth 4. Where a statement of fact is true when made, but a change of circumstances occurs before the contract is formed which makes the statement untrue - Failure to disclose the change in circumstances may amount to a misrepresentation.
• statement must be fact not opinion or intention
• statement must be made by one contracting party to the other
• statement must be one of the factors which induced the other party to enter the contract

Question 4

what remedies are available for misrepresentation ?

Answer 4

1. Recission
2. Indemnity
3. Damages in Lieu of recission (under S2(2) Misrepresentation Act 1967)
4. Damages

Question 5

what are the bars to recission ?

Answer 5

1. where a bona fide purchaser has acquired rights in the property
2. Affirmation
3. undue delay
4. where restitution is impossible.

1,2 &3 are equitable bars
4 is a practical bar

Question 6

What are damages for FRAUDULENT and NON-FRAUDULENT MISREP?

Answer 6

FRAUD
-If the innocent party can prove that the mis rep was made fraudulently then they can sue for damages in the tort of deceit.
- If a party wishes to allege this the onus is on them to prove it
- Damages awarded on tort principles - basically calculates how much the C is out of pocket as a result of this thing

NON-FRAUD
- damages under S2(1) MA 1967 - the C onlt has to show that there was a misrepresentation that cause loss
- Damages under S2(1) are awarded in accordance with tortious principles

Question 7

Describe Negligent Misstatements as a method of recourse?

Answer 7

• May be possible for a person to sue for damages in the tort of negligence if there has been a negligent misstatement.
• Generally pure economic loss is not recoverable in tort
• HOWEVER Hedley Byrne & Co v Heller [1964] HoL recognised exception to this rule in the case of a negligent misstatement which caused economic loss.
• If however misrep is proven - usually better to bring an action under S2(1) MA 1967

Question 8

Explain 2 ways in which a contract may be ILLEGAL ?

Answer 8

CONTRACTS ILLEGAL UNDER STATUTE
- The Competition Act 1998 renders unenforceable, contracts that have the effect of restricting, preventing or distorting trade within the UK.
CONTRACTS ILLEGAL AT COMMON LAW
- Courts will refuse to enforce some contract at common law on the basis that they are contrary to public policy or morality (challenge sanctity of marriage, sexually immoral and those which seek to challenge the jurisdiction of the court.)

contracts will be void if they are found to be illegal