Vitiating Elements: Misrepresentation Flashcards
Process for approaching misrepresentation
- Is the statement a puff, term or representation?
- Misrepresentation?
- Type of Misrepresentation: fraudulent, negligent or innocent?
- Remedy available
What is required for a false preliminary statement to be actionable?
It must amount to a term or a representation
What is the test to determine whether a false statement is a term or a representation?
- Common intention of parties when entered parties
- If common intention is unclear:
- made by expert = term / non-expert = rep
- written = term
- emphasised importance = term
- invited to verify = rep
- short lapse of time = term
How does the classification of a false preliminary statement impact the remedies available?
Term = breach of contract
Rep = tortious damages + recission
Puff = no remedy
Definition of misrepresentation
untrue statement of fact by words or conduct made by one contractual party to another which induced the other to enter the contract
What amounts to an untrue statement for misrepresentation?
- Oral, writing or by conduct
GR: silence is not sufficient (no obligation to disclose material facts)
EXCEPTIONS (must say something):
* fiduciary relationship
* insurance contract
* half-truth
* fails to disclose change in circumstances
What amounts to a statement of fact for mistatement?
Statement must be factual
Includes:
* Lying about intention (e.g. borrow to expand when really to pay off debts)
* no grounds for maker to beleive truth
* opinion by a person in best position to know true facts
Excludes:
* Future intention
* Opinion of maker where both parties know not an expert / not in stronger position (e.g. never sheep farmed)
If a false statement is not made by a contracting party, what recourse does the innocent party have?
tort for negligent mistatement or deceit
What constitutes inducement for misrepresentation?
Relied on statement to enter contract (does not have to be only reason)
No misrepresentation IF:
* appointed expert AND relied on expert’s opinion
* true position is set out in contract signed by C
What is required to prove fraudulent misrepresentation?
Proof of fraud showing:
* D knew statement was false; or
* D did not beleive statement was true; or
* D made statement recklessly
What is required to prove negligent misrepresentation?
- D made a misrepresentation; and
- C suffered loss
When will D be liable for innocent misrepresentation?
D establishes they had reasonable grounds to believe their statement was true
Remedies for misrepresentation?
Fraudulent and Negligent misrep:
* Damages in tort of deceit
* Recission (provided no bars)
Innocent misrep:
* NO damages
* Recission
How are damages in the tort of deceit calculated?
- tortious basis
- Put C in position as if no misrep
- Damages include all consequential loss (remotness irrelevant)
- e.g. profit if bought similar business - actual profit
What is the effect of Recission?
- Contract voidable by innocent party
- Equitable remedy
- Back into pre-contractual position
