Vitiating Factors
Misrepresentation
A misrepresentation is a false statement of fact made that has the result of inducing the
other party to enter a contract. If a misrepresentation is shown to have occurred, the
effect will be that the contract becomes voidable. This means that the party who was
induced into the contract as a result of the misrepresentation may choose to rescind the
contract, but does not necessarily have to.
Misrepresentation is based mainly in contract law, and has a relationship with other
areas of contract that this module guide will explore, such as terms and mistake. There is
also the negligent element of misrepresentation, which is based in tort. Therefore, an
understanding of tortious principles will be helpful in understanding the law.
This chapter will be split into four distinct sections which should allow for a full and
comprehensive understanding of the law of misrepresentation.
1. Defining a misrepresentation
2. What makes a misrepresentation actionable?
3. What type of misrepresentation has been made?
4. The remedies for misrepresentation
1. Defining a misrepresentation
A misrepresentation is a form of statement made prior to the contract being formed. There are two
types of statement that can be made before a contract forms, these will either:
, 1. Form part of the contract
2. Not form part of the contract, therefore becoming a representation.
The importance of this distinction has been explained in the chapter relating to terms, so for a full
understanding it is recommended that you have studied that chapter. But to recap, if a statement is
made that is considered to be a term, in the event of this statement being breached, the aggrieved
party would have a remedy under a breach of contract. However, if a statement is not considered to
be a term, it will be held to be a representation, meaning if that representation is not true, the remedy
will be under the law of misrepresentation. In order to distinguish between the two, the courts will
consider the intentions of the party.
Intention
The courts will attempt to give effect to the parties’ intention insofar as this is possible. This will be an
objectively applied standard. There are a number of presumptions related to when or how a
statement is made which will help the courts when they are attempting to ascertain whether a
statement is a term or a representation (Heilbut, Symons & Co v Buckleton [1913] AC 30). These factors
were covered in detail in the chapter on terms, therefore this chapter will provide a simple overview
of the factors. For more information on this you should refer to the chapter on terms.
Statement is reduced to writing
If a statement has been reduced to writing, there will be a strong presumption that this will form a
term of the contract, as opposed to a representation. The presumption is even stronger if the
document in which the statement is included has been signed (L’Estrange v F Graucob Ltd [1934] 2 KB
394.
If there is a statement reduced to writing, the parties may suggest there was an oral agreement which
is contradictory to the statement made in writing. The courts are unreceptive to such claims, as per
the ‘parole evidence’ rule.
Therefore, when there is a statement which has not been reduced to writing, the presumption may be
that it is a representation. Be careful, as oral statements can still form a term of the contract; you
should still considers the other factors alongside this one.
Specialist skill or knowledge
If the statement is made by a party who has, or claims to have, specialist skill or knowledge, there will
be a presumption that this statement is a term. The cases of Dick Bentley Productions Ltd v Harold
Smith (Motors) Ltd [1965] 1 WLR 623 and Oscar Chess v Williams [1957] 1 WLR 370 are good
authorities for this. In Dick Bentley, the statement was held to be a term because it was made by a car
dealer who would claim to have specialist skill or knowledge. However, in Oscar Chess, the statement
was made by a private seller who had no real specialist skill or knowledge.
Lapse of time
As a general rule, if there is a longer lapse of time between the statement and the formation of the
contract, the greater the presumption will be that the statement is a representation.
, 2. What makes a misrepresentation actionable?
In order for a representation to become a misrepresentation, it must be first proven that it was an
unambiguous, false statement of fact. In order to prove this misrepresentation is actionable, it must
be shown that this representation induced the claimant to enter the contract.
Unambiguous, false statement
False and unambiguous
Ascertaining whether a statement is false in the context of misrepresentation is not as straightforward
as a question of whether the statement is true or false. The degree of falsity is a relevant
consideration. The case of Avon Insurance plc v Swire Fraser Ltd [2000] 1 All ER (Comm) 573 ruled that
the test to apply is whether or not the statement is “substantially correct”. This involves a
consideration of the inducement of the individual to the contract. If a statement is made that was
technically false, but most of the statement was true, the statement would held to be true so long as
the true part of the statement induced the claimant into the contract, as opposed to the false part.
Whether or not the false statement is unambiguous refers to how the claimant interpreted the
statement. If, on a reasonable construction, the statement was true, however, the claimant
interpreted the statement in a different way which rendered the statement false, the statement would
not be unambiguously false, and the claim would fail. The case of McInerny v Lloyds Bank Ltd [1974] 1
Lloyd’s Rep 246 is an example of this, where the unreasonable interpretation of the statement by the
claimant meant the claim failed.
Statement
The word ‘statement’ has been broadly interpreted. ‘Statement’ does not just refer to a verbal
statement; it has been held that conduct can amount to a statement for the purpose of
misrepresentation. The case of Curtis v Chemical Cleaning & Dyeing co Ltd [1951] 1 KB 805 outlined
this fact. An example of this can be found in Gordon v Selico (1986) 278 EG 53, where the concealment
of some dry rot during an inspection of a property was held to be a statement which misrepresented
the fact that the property was free of dry rot.
Silence or non-disclosure will not amount to a statement, it is clear that there must be some kind of
positive conduct to constitute a statement. Therefore, although in Gordon v Selico the party was silent
as to the existence of dry rot, the conduct went beyond merely remaining silent; there were active
steps to conceal this fact.
Half-truths
A misleading half-truth will amount to a misrepresentation. A misleading half-truth is a true statement
which is misleading due to all relevant information not being revealed. Take the case of Nottingham
Patent Brick & Tile Co v Butler(1885) LR 16 QBD, where a solicitor was asked whether any restrictive
covenants burdened some land. The solicitor answered that he was not aware of any, which was
technically true, as he had not yet checked. Of course, when he checked, there was some restrictive
covenants. Therefore, the statement was technically true, but only half-true and misleading, meaning
it would be construed as false.
