Lecture notes
Misrepresentation
- Module
- Law of Contract
- Institution
- University Of Sussex (UoS)
Lecture notes of 23 pages for the course Law of Contract at UoS (Misrepresentation)
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By: umerabibi • 3 year ago
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MisrepresentationIntroduction
Party may have entered contract on the basis of false statement by other party.
In general, this renders contract voidable.
If representor acted culpably, representee has claim for damages in tort (deceit or
negligence).
Remedies depend upon whether representor was fraudulent negligent or innocent.
Rules are blend of common law, equity and statute.
Rules address procedural fairness.
Statement as Contractual Term
Statement made during negotiations may form term of contract.
CRA s 50 – anything said or written by service provider to consumer and taken into
account by consumer is term of contract.
If statement is term, representee may claim damages for breach of contract, placing
representee in position as if statement had been true.
Damages for misrepresentation place representee in position as if truth had been
told (i.e. as if contract had not been made).
Actual Misrepresentation
Remedy for misrepresentation requires unambiguous false statement of existing fact
which induced representee to enter into contract.
False and Unambiguous
Statement must be false.
It is not 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
representee put false construction on it.
Statement
Misrepresentation usually takes the form of a verbal statement.
But other conduct conveying information may also constitute misrepresentation.
Spice Girls Ltd v Aprilia World Service BV (2002).
Silence
What if X knows that certain fact is important to Y but remains silent about it?
General rule – not duty to disclose facts; mere silence is not misrepresentation.
Parties must look after their own affairs – caveat emptor.
Half-Truth
, Statement that is true is still misrepresentation if it doesn’t reveal all relevant facts.
Dimmock v Hallett (1866) – vendor of property described it as fully let, without
disclosing that the tenants had given notice to quit.
Change of Circumstances
Where statement is true when made but before the formation of the contract it
becomes false through change of circumstances, there is duty to correct.
With v O’Flanagan (1936) – vendor of medical practice gave information about
income; subsequently, doctor became ill and income fell dramatically.
The claimant entered into negotiations with the defendant for the purchase of the
defendant’s medical practice. During the negotiations, the defendant represented to
the claimant that the practice took in around £2,000 per year.
The defendant signed the contract for the purchase some five months later, but by
this date, the practice had declined significantly as a result of the ill health of the
defendant.
When the claimant took possession of the practice, it was discovered that it was now
almost non-existent.
The claimant sought to rescind the contract on the basis that the representation as
to the income had been a misrepresentation.
At first instance, it was held that the representation was, at the time it was made,
accurate and therefore, because this meant that the claimant could not demonstrate
that the representation was untrue, the claim must fail.
The defendant appealed.
The issue in this circumstance was whether there remained an obligation to inform a
party to a contract when the circumstances material to a representation, which
induced them to enter into the contract, had changed.
The Court of Appeal reversed the decision at first instance. It was held that the
representation made by the defendant was intended to induce the claimant to enter
into the contract and therefore would be considered ongoing until the contract was
signed.
This meant that at the time that the contract was signed, the representation was
untrue. The defendant ought to have told the claimant of the change of
circumstances.
Spice Girls Ltd v Aprilia World Service BV (2002) – group became aware that Geri
Halliwell intended to leave.
Duty to Disclose Facts
, Duty to disclose facts exists exceptionally in certain circumstances.
In fiduciary relationships (e.g. solicitor and client), the fiduciary must disclose all
material facts.
Duty of disclosure also exists in contracts uberrimae fidei (of utmost good faith).
In particular, in insurance contracts insured must disclose all material facts or at least
take all reasonable care.
Statement of Fact
Statement must be one of existing or past fact, not belief, opinion or intention.
Representee is only justified in relying on facts, which can be true or false.
Opinion or Belief
In general, statement of opinion is not statement of fact.
Bisset v Wilkinson (1927) – (‘farm can carry 2000 sheep’).
The defendant in this matter was the purchaser of land in New Zealand which was
purchased by the claimant for the purpose of sheep farming.
The appeal, to which this judgment relates, is on the defendant’s counterclaim.
During the purchase process, the claimant informed the defendant that the land
being purchased was capable of sustaining 2000 sheep.
However, after the purchase the defendant discovered that this was only possible if
very careful land management was carried out, and that the land as it stood could
not sustain this number of sheep.
The defendant therefore sought to rescind the contract on the basis that the
claimant’s statement was a misrepresentation.
The issue in this circumstance was whether the statement made by the claimant
could be considered a statement of fact in terms of being a representation, or
whether it was simply an opinion held by the claimant.
It was held that the claimant’s statement was nothing more than an opinion as to
the capacity of the land, based on the claimant’s knowledge of farming, together
with the defendant’s knowledge of the current stock.
The statement was not therefore held to be a representation. In any event, the
defendant had not been able to demonstrate that the land was not capable of
carrying the 2000 sheep that the claimant had stated, and therefore the claimant’s
appeal was allowed and the contract could not be rescinded.
It is irrelevant whether the opinion is reasonable; no duty to make inquiries.
However, where representor has special knowledge, statement of opinion may
amount to statement that representor has reasonable grounds for making
statement.
Smith v Land & House Property Corp (1884) – (‘most desirable tenant’).
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