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Contract LawLecture 13 – Misrepresentation
when approaching misrepresentation always by asking 1. Was the statement fact or
opinion and 2. did it induce the contract and take it from there
OUTLINE/ Misrepresentation
A pre-contractual misrepresentation may give rise to
(i) a right at common law, or an action in equity, to rescind a contract;
(ii) an action for damages in the tort of deceit;
(iii) an action for damages under the Misrepresentation Act 1967, s 2(1);
(iv) an action for damages in the tort of negligence; and/or
(v) an action for damages for breach of contract.
Actionable misrepresentations/ when can they result in a remedy?
For rescission, damages in deceit, or under the 1967 Act, the misrepresentation :
1. Must be of past or present fact or law (not opinion, belief, or intention)
2. May be express, or arise from silence or conduct
3. Must be false
▪ The content/meaning of a representation is determined objectively, ie what a reasonable
person would have understood from the representor’s words and/or conduct, in their
context : IFE Fund SA v Goldman Sachs International [2006] EWHC 2887 (Comm) [50] McK
564
Other elements of misrepresentation actions –
▪ Mental elements: in distinguishing the different types – have to show mental element
- Fraud/dishonesty
- Intention that representee should be induced to act
▪ Inducement / reliance
▪ ‘Material’ misrepresentations
▪ Further causation requirements?
▪ Damages: measure of
▪ Rescission
Past or present fact or law (not opinion, belief, or intention)
▪ Bisset v Wilkinson [1927] AC 177 – starting point
▪ Seller of unit of land in NZ told prospective buyer, honestly, that ‘[his] idea was that [the
land] would carry two thousand sheep’.
▪ Buyer was aware that the land had never been used for sheep farming.
▪ In the event, buyer was not able to make the land carry 2,000 sheep.
, Contract Law
Held:
▪ A representation of fact may be inherent in a statement of opinion.
▪ The honest existence of an opinion in the person stating it, is a fact.
▪ Ordinarily, a statement made by a farm-owner regarding its carrying capacity would be
treated as a statement of fact
▪ However, the facts regarding the sheep-carrying capacity of the land were equally well
known / unknown by buyer and seller, the seller’s statement was merely an expression of
his opinion on the subject.
Statement by the seller did not result in an actionable representation – was an opinion
not a fact
Smith v Land and House Property Corporation (1884) 28 ChD 7
▪ S was selling a hotel
▪ Stated in the particulars that it was let to ’F (a most desirable tenant)’
▪ In fact, F had fallen behind with last quarter’s rent, and had been very late in paying the
quarter before
▪ L agreed to purchase the hotel in reliance on the statement regarding F; F went into
liquidation shortly thereafter
▪ Held: the statement contained a misrepresentation of specific fact, and not merely
opinion.
most desirable tenant was a statement of fact – not been paying his rent so how can you
describe him as desireable?
Bowen LJ:
‘It is material to observe that it is often fallaciously assumed that a statement of opinion
cannot involve the statement of a fact. In a case where the facts are equally well known to
both parties, what one of them says to the other is frequently nothing but an expression of
opinion. The statement of such opinion is in a sense a statement of a fact, about the
condition of the man’s own mind, but only of an irrelevant fact, for it is of no consequence
what the opinion is. But if the facts are not equally known to both sides, then a statement of
opinion by the one who knows the facts best involves very often a statement of a material
fact, for he impliedly states that he knows facts which justify his opinion. Now a landlord
knows the relations between himself and his tenant, other persons either do not know them
at all or do not know them equally well, and if the landlord says that he considers that the
relations between himself and his tenant are satisfactory, he really avers that the facts
peculiarly within his knowledge are such as to render that opinion reasonable.’
▪ Note closer look
Landlord knew that he was not paying and therefore not possible for him to say he was
desirable
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