Vitiating factors
29/01/2019
Misrepresentation
- One party is taking advantage of the other by misrepresentation
- Based on common law, but supplemented by statutory intervention through the
Misrepresentation Act 1967
o Affecting the position in relation to remedies
- Concerns the situation where a false statement leads a contracting party to enter
into a contract which would otherwise not have been undertaken
o Contract may be rescinded under common law
Core requirements
- The false statement must have been made by one of the contracting persons to the
other
o Misrepresentation by a 3rd party has no effect on the contract or relationship
with other contracting party
o Dowie v Crystal Palace FC [2001] EWHC 13
D was contracted as manager of Crystal Palace (fixed term contract)
Contained compensation clause requiring D to pay the club a
fee of £1m if he was to leave prior to the end of the contract
D wished to see his family more
Agreed that the compensation clause would not be enforced if D did
not bring any financial claims against the club that he might have
D spoke to chairman of Charlton Athletic expressing interest in
becoming manager
D then denied this happening
Court held that D had made false representations which had induced
CP to enter the compromise agreement
Misrepresented that he had wanted to move north, that he
had not been in contact with Charlton Athletic and that he had
no intention of joining Charlton when in fact they had made a
conditional offer to him
o Conduct can amount to misrepresentation
Gordon v Selico (1986)
Dealt with the lease of a flat in London
2nd Ds had instructed some painters to conceal patches of dry
rot
Plaintiffs obtained a detailed survey which came back positive
o Moved in a subsequently discovered extensive dry rot
CoA held that ordinarily a misrepresentation is made by a
statement of supposed fact, or otherwise a statement of
intent
o However, the painting of dry rot to conceal it
amounted to misrepresentation
Spice Girls Ltd. v Aprila World Service [2002]
, SG took part in photo shoot and promotions for AWS scooters
prior to signing a sponsorship agreement for their tour
A few weeks later Geri Halliwell left
Held that this amounted to misrepresentation by conduct
o Halliwell admitted to the other members that she
intended to leave prior to the photoshoot
- It must be a statement of existing fact or of law, not opinion
o Bisset v Wilkinson (1927)
Farmer in NZ told plaintiff that land would hold 2000 sheep
Clear to pl that farmer had never put sheep on the land so
wouldn’t know for sure
Pl bought the land but was not big enough for the 2000 sheep
Sought to rescind the contract on the grounds of
misrepresentation
Privy council – this was not misrepresentation
Farmer’s view of the matter was merely an expression of
opinion not a statement of fact
o 3 situations where a statement that appear to be opinion will be treated as
one of fact
Opinion must not be contradicted by other facts know to the person
giving it
Smith v Land and House Property Corp (1884)
o D made statement that a tenant was “most desirable”
o Looked like an opinion but knew that the tenant had
been in arrears of rent for a long time
o Bowen LJ - "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.“
Where the statement of opinion comes from an expert
Esso Petroleum Ltd v Mardon [1976]
o Petrol station from last term
o If a person who has, or professes to have, special
knowledge or skill makes a representation (be it advice,
info, 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 the advice, info, or opinion is reliable.
o Negligent misstatement
Statement of intention to act in a particular way in future may be
interpreted as a statement of fact
A statement of intention to act in a particular was in future
may be interpreted as a statement of fact if it is clear that the
, person making the statement did not, at that time, have any
intention of acting
Edgington v Fitzmaurice (1885)
o Company directors sent out prospectus to shareholders
inviting subscriptions for bonds
Said money would go to alter their buildings,
buy horses, vans and expand into supplying fish
Actual purpose was to pay off debts
the statement of law can be treated as a statement of fact for the
purposes of misrepresentation
Pankhania v Hackney London Borough Council [2004]
o Claimants bought property induced by a representation
that the current occupiers of the property were
contractual licensees, whose occupation would be
terminated on giving 3 months notice
In fact the current occupant was a tenant
protected under the Landlord and Tenant Act
1954
o This was a misrepresentation as to law which had
previously been assumed not to be an actionable
misrepresentation
Misrepresentation by silence
Generally no misrepresentation by silence
Even where one party is aware that the other is contracting on
the basis of a misunderstanding of some fact relating to the
contract, there will generally be no liability
o Negative obligation to not tell falsehoods, not a
positive obligation to tell the truth
However if a true statement is made and then circumstances
change to make it false, a failure to disclose this will be treated
as a misrepresentation
o With v O’Flanagan [1836]
Doctor selling practice
Told potential purchaser that he had income of
£2000/yr
This was true at the time and practice
declined in profitability
o By the time of sale the average
taking was only £5/week
Purchaser sought to rescind the contract – CoA
supported claimant
Failure to notify the purchaser of the
change in circumstances amounted to
misrepresentation
Lord Wright MR
o W could rescind – duty to point
out the change in circumstance
, or because the representation
continued until the point of
which the contract was signed
o A ‘representation made as a
matter of inducement to enter a
contract is to be treated as a
continuing representation.’
Silence can also constitute misrepresentation in contracts
which are entered into on the basis of “utmost good faith”
o Lambert v Co-Operative Insurance Society [1975]
L wanted to renew insurance on jewellery and
failed to disclose that her husband had a
number of convictions for theft and conspiracy
to steal
Jewellery was subsequently stolen
o Insurance company would not
compensate her under policy
o Keates v Earl of Cadogan (1851)
D left house to pl knowing he wanted
immediate occupation, did not tell him house
was inhabitable
Held – in the absence of fraud, defendant under
no implied duty to disclose the state of the
house
Caveat emptor – contracting parties should not
be expected to share every bit of relevant
information with each other
- The statement must have induced the other party to enter the contract
o It is not sufficient for the claimant to point to a false statement of fact made
by the defendant prior to the contract being formed
Need to show that it induced the contract
o JEB Fasteners v Bloom [1981]
Plaintiffs took over business having seen inaccurate accounts
Reason for taking over the business was the wish to secure the
services of two directors
Accounts had not induced their action in agreeing the contract
o Horsfall v Thomas [1862]
Buyer of gun didn’t examine it prior to purchase
The concealment of the defect in the gun didn’t affect his
decision to purchases as, since he was unaware of the
misrepresentation, he could not have been induced into the
contract by it
o Action thus failed
o Edgington v Fitzmaurice
Pl was influenced not only by the prospectus but by the assumption
that he would have a charge on the assets of the company
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