Vitiating factors- misrepresentation Flashcards
Vitiating factors
Vitiating factors are factors that make a contract void, this means that the contract has no legal standing there are 2 vitiating factors are misrepresentation and economic duress
Misrepresentation definition
A misrepresentation is a false statement of material fact made by a party to the contract before or a time of the contract that induces the other party to enter the contract
4 things that the claimant must prove in order for it to be a misrepresentation
In order for there to be a misrepresentation in a contract a claimant must prove 4 things: there must be a false statement ,this statement must be material fact, this statement must be made by a party before or at time of the contract, this statement must induce the claimant to enter the contract.
First element of misrepresentation-False statement
The first thing that the claimant must prove that there is a false statement. The false statement is a statement that is not true. The false statement does not need to be written or verbal this could be a misleading picture as seen in Spice Girls V Aprillla world service where The Spice Girls had signed a sponsorship agreement with Aprilia. While the agreement was being negotiated, unknown to Aprilia, a member of the group, Geri Halliwell, had given notice to leave the group. Filming of promotional material took place with all the girls together, but when one left it made the films worthless for promotional purposes. The court decided that by all of them attending, the group represented that none of them intended to leave the group and none of them was aware that one member intended to. This was a misrepresentation however silence cannot be a false statement this can be seen as the case of Fletcher V Krell where there was no misrepresentation as she was under no duty to disclose her marital status, she had been asked about it
Exceptions to the rule of silence
Change in circumstances
Half-truth
relationship based on trust
uberrimane Fidel contract
Exception to the rule of silence- Change in circumstances
he first exception to the rule that silence cannot be a false statement his is where circumstances change. This is where a true statement has already been made but it becomes untrue before the contract is agreed and the defendant does not claim this then defendant’s silence will be seen as a false statement this can be seen with the case of With v O’Flanagan where A doctor accurately stated the profits of his medical practice with a view to inducing purchasers to buy the practice. However, between the statement and the contract being made, the doctor fell ill and many of the patients left the practice. This made the original statement inaccurate. The court decided he had to tell the purchaser of the changed situation
Exceptions to the rule of silence- Half-truth
The second exception to the rule that silence cannot be a false statement is half-truth this is where a statement is made which is not the whole truth this can be said with the case of Dimmock v Hallett where the seller of the land told the purchaser truthfully that there were tenants on the land. This was exactly what the purchaser wanted. However, he did not complete the statement by telling the purchaser that all the tenants were leaving. The court decided that this part-truth was a misrepresentation.
Exceptions to the rule of silence- Relationdhip based on trust
The third exception to the rule of silence cannot be a false statement is where the relationship between parties are based on trust, this is where the claimant enters a contract on the basis of trusting the other party this can be seen in the case of Tate v Williamson this is where A financial adviser advised his client to sell some land for less than half its value so that his client could clear his debts. The adviser then purchased the land himself but did not tell his client that he had done so. The court decided that this was a breach of trust and was therefore a misrepresentation.
Exceptions to the rule of silence - Ubberimane fidel contract
The next element that the claimant must provide the false statement is of material fact this can not just opinion this can be seen with the case of Bissett V Wilkinson where The seller of farmland that had never had sheep on it was asked by the buyer how many sheep it could take. Although he was not a sheep farmer, he stated that he thought it would support about two thousand. This turned out to be false. However, as he genuinely believed his opinion to be accurate, it was not a misrepresentation.
The next element that the claimant must prove is false statement of material fact
The next element that the claimant must provide the false statement is of material fact this can not just opinion this can be seen with the case of Bissett V Wilkinson where The seller of farmland that had never had sheep on it was asked by the buyer how many sheep it could take. Although he was not a sheep farmer, he stated that he thought it would support about two thousand. This turned out to be false. However, as he genuinely believed his opinion to be accurate, it was not a misrepresentation
The next element that the claimant must prove is it was made by someone who was a party to the contract
it was made by someone who was a party to the contract. This is because the statement must have been by the defendant before the contract was agreed
The final element that the claimant must prove is it must have induced the other party to enter the contract
The final element that the claimant must prove is it must have induced the other party to enter the contract as seen in the case of Attwood V Small where The seller made a false statement to the purchaser about the earnings from his mine. The buyer instructed a surveyor to confirm this statement, which he did (incorrectly). The purchaser bought the mine and then discovered the statement to be untrue. There was no misrepresentation as the purchaser relied on the survey report and not the seller’s statement. Additionally this element can still be proven even if claimant could reasonably have checked to see if the statement was true
statute rules on misrepresentation
The extra rules developed by statute in order to make misrepresentation on consumers clearly However, note that under the Consumer Insurance (disclosure and representations) Act 2012, a ‘consumer’ only needs to disclose information when asked to do so. Insurance companies cannot refuse to pay out on a consumer policy just because the consumer did not realise, they should have disclosed some relevant information. They can only refuse to pay out if the consumer deliberately or carelessly withheld information. However, the Act does also allow an insurance company to reduce any payout by the proportion that the insurance premium would have increased if they had been told the information (which the consumer did not realise they should have disclosed).
If the person/organisation who takes out the insurance policy is NOT a consumer (ie. a business), then this Act does not apply. In this case use the old law on uberrimae fidei contracts - silence will be a misrepresentation if the business has failed to disclose ANY relevant information to the insurance company. So, the insurance policy will be void and the insurance company can refuse to pay out on any claim additionally the consumer protection amendment regulations 2014 where the it decided when information given to a consumer can be misleading omission thus a misrepresentation the defendant omits material information that the average consumer needs, according to the context, to make an informed transactional decision, hides or provides material information in an unclear, unintelligible, ambiguous or untimely manner or fails to identify the commercial intent of the commercial practice if this is not already clear from the context
Types of misrepresentation
There are 3 types of misrepresentation these are highlighted in misrepresentation Act 1967:innocent,negiligent, Fraudulent
Innocent Misrepresentation
Innocent misrepresentation this is where a representation which is genuinely held on reasonable grounds this is a false statement that was made honestly the person making these statement always believed it to be true thus there is no negligence
negligent misrepresentation
Negligent misrepresentation is a false statement made by a person that had reasonable ground to believe the statement was true this can be seen in the case of Howard Marine V Ogden where Howard argued that they had reasonable grounds for believing the statement to be true as they had checked Lloyds’ Register. However, as they had the registration document of the dredger, which stated the correct capacity, this argument failed
Fraudulent misrepresentation
Fraudulent Misrepresentation is when the person making the statement that they know is untrue or is reckless as to whether or not it is true this can be seen in the case of Greenridge Luton One Ltd v Kempton Investments Ltd where The High Court held that a buyer of a commercial property was entitled to have its deposit returned because of an untrue representation made recklessly or fraudulently by the seller, that there were no service charge arrears, when in fact there were such arrears. There was fraudulent misrepresentation, and the buyer was also entitled to damages for deceit of £395,948h.
Remedies of Misrepresenation
Remedies of misrepresentations is Recessions and damages. Recission is setting aside the contract and put parties in the original position if though the contract had not been made
The bars to recission- restitution to pre contract position is impossible where the contract can not be reversed
One of the bars to recission is restitution to pre contract position is impossible where the contract can not be reversed this can be seen in the case of Clarke v Dickson where the claimant was misled into becoming a partner in a business changed to become a limited company before the claimant wanted to rescind the contract it was decided that recission could not available he could not return the partnership as the company had become a limited company
bars to recission - the claimant has affirmed the contract this where the innocent party decides to carry on with the contract despite being aware of the misrepresentation the right to rescind the contract is lost
The another bar to rescission is the claimant has affirmed the contract this where the innocent party decides to carry on with the contract despite being aware of the misrepresentation the right to rescind the contract is lost this can be seen in the case of Long v Lloyd where the claimant was told by the seller that a lorry was in excellent condition, but shortly after the sale it broke down. The claimant noticed faults with the lorry and contacted the defendant, who offered to pay half the repairs, which he agreed to. The lorry broke down again shortly afterwards and the claimant wanted to rescind the contract. The court refused to grant rescission because by persevering with the lorry after the first breakdown and agreeing to share the cost of repairs, he had indicated his willingness to continue with the contract and so affirmed the contract.
bars to recission - delay
Another bar to recission is delay. Once a contract has been completed any complaints are likely to arise within a short time after that you assume these are no major problems this can be seen with the case of Leaf v International Galleries where In 1944, the claimant had purchased a picture of Salisbury Cathedral from the defendant. He was told that it was by Constable but only found out it was not by him when he tried to sell it five years later. Rescission was not allowed because of the delay in bringing his claim.
Bars to recission- a third party has gained over the property this is when someone else has gained an interest in the subject matter of the contract then recission will not be granted
Another bar to recission is a third party has gained over the property this is when someone else has gained an interest in the subject matter of the contract then recission will not be granted this can be seen with the case of Lewis v Averay (1972) Lewis sold his car and let the buyer take it away in exchange for a cheque. The cheque was worthless. The buyer had accepted it as he was persuaded by the fraudster that he was the well-known actor Richard Greene who had played Robin Hood on television. In fact, the rogue posed as Richard Greene but signed the cheque ‘R A Green’. The buyer then sold the car to the defendant, an innocent third party. The original seller’s only effective remedy was to claim rescission and to ask for the car to be returned to him by the innocent third party. The claim for rescission failed as, between the two innocent parties, it would be more unfair to deprive the third party of the car purchased in good faith
