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Misrepresentation
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Contract law:Misrepresentation:
Pre-contractual statements may be:
- So important that they become terms of the contract; is the statement is untrue the remedy will be
a breach of contract
- Classified as mere puff and therefore attract no legal consequences
- Classified as representations; if the statement is untrue, the remedy will be misrepresentation
Definition of operative misrepresentation:
- An unambiguous false statement of past or existing fact, made by one party to the contract to the
other, before or at the time of contracting, on which the other party has relied in contracting
- Contract will be voidable – entitled to rescind and to claim damages
- N.B Role of damages to put the party back into the position they would have been in had the
misrepresentation never been made
Four types of misrepresentation:
- Fraudulent misrepresentation- damages for the tort of deceit
- Negligent misrepresentation- damages for the tort of negligent misstatement- common law
- Statutory misrepresentation- Misrepresentation Act 1967, section 2 provides for an award of
damages
- Innocent misrepresentation- strictly rescission only, but section 2(2) Misrepresentation Act 1967
Ingredients: false statement:
- statement must be false
- it is not false if it is substantially correct, so that false aspect would not have induced reasonable
person to enter into contract
- statement that is true on reasonable construction will not be false only because the representee
put false construction on it
Ingredients: statement of fact:
- statement of intention?
o Statement of intention itself cannot constitute misrepresentation BUT a statement of
intention carries with it an implied statement of fact as to the state of mind of representor
o Edgington v Fitzmaurice
“The state of a man’s mind is as much a fact as the state of his digestion. It is true that is
very difficult to prove what the state of a man’s mind at a particular time is, but if it can be
ascertained it is as much a fact as anything else. A Misrepresentation as to the state of a
man’s mind is, therefore, a misstatement of fact.’ Per Bowen, L.J.
- Statement of opinion?
o General rule: where it is a genuine statement of opinion, no misrepresentation Bisset v
Wilkinson
o BUT if you give an opinion you know to be false- you can misrepresent the fact you have
reasonable grounds to hold that opinion: Smith v Land & House Prop Corp: LJ Bowen “if the
facts are not known equally to both sides then a statement of opinion by the one who
knows the facts best involves very often a statement of material fact for, he impliedly states
that he knows facts which justify his opinion.”
o Esso Petroleum Co Ltd v Mardon
“It seems to me that Hedley v Byrne v Heller properly understood, covers this particular
proposition: if a man, who has or professes to have special knowledge or skill, makes a
representation by virtue thereof to another – be it advice, information or opinion – with the
intention of inducing him to enter into a contract with him, he is under a duty to use
, reasonable care to see that the representation is correct, and that the advice, information
expresses an erroneous opinion and thereby induces the other side to enter into a contract
with him, he is liable in damages.”
- Silence?
o No duty of disclosure in English Law so the general rule is that silence does not constitute a
misrepresentation
Turner v Green: mere non-disclosure of a material fact did not constitute a
misrepresentation
BUT partial disclosure?
Notts Patent Brick & Tile Co v Butler
Dimmock v Hallet
Crystal Palace FC v Dowie
- Change of circumstances?
o With v O’Flanagan
- Conduct?
o Spice Girls v Aprilla
Reliance:
The fact of the misrepresentative statement alone is not enough – in order for it to be operative in law, it
must have been made to someone who becomes a party to the contract, and it must have been relied
upon in the decision to enter that contract
- Smith v Chadwick
o False statement played no part in the decision to contract
- Horsfall v Thomas
- Attwood v Small
o An opportunity to discover the truth did not negate the misrepresentation
- Hayward v Zurich Insurance
o The representee does not have to believe that the representation was true
Type of misrepresentation:
- Fraudulent, negligent misstatement (tort), Misrepresentation Act, innocent
- Recission available for all types of misrepresentation
- The amount of damages you can claim varies depending on the type of misrepresentation
Fraudulent misrepresentation:
- Derry v Peek
“Fraud is proved when it shown that a false misrepresentation has been made, (1) knowingly, or (2)
without belief in its truth, or (3) recklessly, careless whether it be true or false
- Burden of proof is on the representee
- BskyB v HP Enterprise Services
- Akerhielm v de Mare
“The question is not whether the defendant in any given case honestly believed the representation
to be true in the sense assigned to it by the court on an objective consideration of its truth or
falsity, BUT whether he honestly believed the representation to be true in the sense in which he
understood it, albeit erroneously, when it was made.” Per Lord Jenkins
- Jewson & Sons v Arcos
Look for appropriate state of mind
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