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Contract Law - Misrepresentation Summary
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Comprehensive summary/exam notes on misrepresentation in Contract Law. This document covers the three elements of misrepresentation (statement of existing law/fact, addressed to the party misled, and inducement), the three types of misrepresentation (fraudulent, negligent and innocent), the two rem...

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  • October 6, 2024
  • 9
  • 2022/2023
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Misrepresentation
1. What is misrepresentation?
A misrepresentation = an unambiguous, false statement of fact or law which is
addressed to the party misled, which is material, and which induces the contract.
Three distinct elements:
(1) Statement of existing fact or law,
(2) Addressed to the party misled,
(3) Inducement.
2. Statement of Existing Fact or Law:
General rule = the representation must be an unambiguous false statement of
existing fact or law.
The need for a statement underlines the point that a failure to disclose
information will not generally constitute a representation.
There are three existing categories of statement which have been held not to
constitute statements of existing fact and therefore cannot amount to actionable
misrepresentation:
a. A ‘mere puff’:
‘Mere puff’ = a non-promissory statement that may be used as part of
negotiations to advertise a product and induce another to enter into a contract.
= an exaggerated statement that no reasonable person would believe
to be true.
b. A statement of opinion or belief:
General rule = a statement of opinion or belief which proves to be
unfounded is not a false statement of fact.
Bisset v Wilkinson –
Vendor of a farm in New Zealand, which had not been used
for sheep farming before, represented to a prospective
purchaser that, in his judgement, the land could carry 2,000
sheep.
In fact, it could not carry 2,000 sheep and the purchaser,
when he discovered this, sought to set aside the contract on
the ground of the vendor’s misrepresentation.
He was unable to do so because the vendor’s statement was
not a false statement of fact but a statement of opinion which
he honestly held.
This was distinguished in Esso Petroleum Ltd v Mardon –
Filling station – represented that the through put would be 200,000
gallons by the third year. Esso argued that their statement as to the
through put was a statement of opinion and so was not actionable.
Lord Denning – distinguished Bisset on the ground that in
that case “the land had never been used as a sheep farm and
both parties were equally able to form an opinion as to its
carrying capacity.”
Esso, on the other hand, had special knowledge and
skill in the forecasting of the throughput.
c. A statement of intention:
General rule = a statement of intention is not a statement of fact.
Nor is a promise a statement of fact.
SO – a person who fails to carry out his stated intention does not thereby
make a misrepresentation.
Wales v Wadham
BUT – a person who misrepresents his present intention does make a false
statement of fact because the state of his intention is a matter of fact.

, Edgington v Fitzmaurice –
Directors of a company invited the public to subscribe to
debentures on the basis that the money so raised would be
used to expand the business. In fact, the real purpose in
raising the money was to pay off company debt.
The directors were guilty of misrepresentation because they
misrepresented their actual intention.
“A statement as to future intention is a statement of
facts with regard to the speaker’s current state of
mind. If they do not actually intend to act as they
have represented this is an actionable
misrepresentation or deceit.”
3. Addressed to the Party Misled:
General rule = it must be shown that the representation was addressed to the party
misled.
This can either be through:
- Direct communication of the misrepresentation to the claimant by the
representor, or
- The misrepresentation may be addressed by the representor to a third
party with the intention that it be passed on to the claimant – agent.
4. Inducement:
Orthodox position = if the misrepresentation would have induced a reasonable
person to enter into the contract, then the court will presume that it did induce the
representee to enter into the contract, and the onus of proof is then placed on the
representor to show otherwise.
Museprime Properties Ltd v Adhill Properties Ltd –
“A misrepresentation which has no impact on the mind of the representee is no more
harmful than an arrow which misses the target.”
Lord Toulson in Zurich Insurance Co plc v Hayward
The misrepresentation need not be the sole inducement, nor must it have been
decisive.
Bowen J in Edgington v Fitzmaurice – it was only necessary for the
misrepresentation to be “actively present” in the claimant’s mind at the time,
making it “part of the cause”.
Does it matter if the claimant had an opportunity to discover the truth but did not take
it?
Redgrave v Hurd says no – D sought documents which showed what
accounted for the missing £100 a year income which he did not read.
D was still entitled to have the contract rescinded and the deposit
returned.
BUT – in light of the decision in Smith v Eric S Bush, this may no longer
apply where it was reasonable to expect the representee to make use of the
opportunity and he fails to do so.
5. The Type of Misrepresentation:
Important to distinguish as they may give rise to different remedial consequences.
All entitle the representee to rescind the contract.
BUT – not all give rise to an action for damages.
a. Fraudulent Misrepresentation:
Derry v Peek –
Lord Herschell established following three propositions:
(1) There must be proof of fraud and nothing short of that is sufficient.
(2) Fraud is proved when it is shown that a false representation has been
made:
a. Knowingly, or
b. Without belief in its truth, or

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