Misrepresentation

Question 1

If a statement is made during contractual negotiations - how do we know if it is a term or a representation?

Answer 1

Terms -> bind and are contractual,

Representations -> do not bind and are usually not contractual.

⇒ Therefore, breaching a representation is not a cause of action for breach of contract. An inWnocent party can only claim misrepresentation.

Question 2

What is the difference between a representation and a warranty?

Answer 2

Representation -> statement of fact applying to past or present and may give rise to remedies in the form of damages or voiding the contract.

Warranty -> statement of condition for the present or future that may give rights to claim damages.

Question 3

What are the 6 elements of an actionable misrepresentation?

Answer 3

1. Unambiguous
2. False
3. Statement of fact
4. no silence
5. addressed to C
6. Induces C to enter into the contract with representor

Question 4

Can there be misrepresentation by conduct?n

Answer 4

yes so long as this is directed to C

Question 5

Can ‘mere puff/ sales talk be considered a statement of fact?

Answer 5

no

Question 6

When can a statement of opinion count as a statement of fact?

Answer 6

Where the representor has some special knowledge or skill

Question 7

Can half-truths be misrepresentations

Answer 7

yes

where statement is misleading/ weak truth (e.g. X asks Y if there are faults in the car -> Y says no just because they haven’t checked)

Question 8

What if a statement is made which is true at the beginning of negotiations but circumstances change to make it false - is this a continuing misrepresentation?

Answer 8

yes -> statement must be corrected before contract is entered into

Question 9

What is a contract of utmost good faith, give an example?

Answer 9

Where there is a duty to disclose all material facts.

Where there is a significant asymmetry in knowledge of facts.

e.g. health insurance

Question 10

A requirement for an actionable misrepresentation is that this must have induced C to enter into the contract. Does it need to be shown that the representation was the only reason for which C entered into the contract?

Answer 10

no -> a reason will suffice

Question 11

Once it has been established that there has been a misrepresentation, you must determine what category it falls into. What are the 3 categories?

Answer 11

1. Fraudulent misrepresentation
2. Negligent misrepresentation
3. Innocent misrepresentation

Question 12

What are the 2 requirements of a fraudulent misrepresentation?

Answer 12

1. False representation
2. made: knowingly, without belief in its truth or recklessly.

Question 13

Does there need to be motive to establish a fraudulent misrepresentation?

Answer 13

no

Question 14

Who holds the burden of proof when establishing that there was a fraudulent misrepresentation?

Answer 14

C

Question 15

What are the 2 main remedies for fraudulent misrepresentation?

Answer 15

1. Rescission
2. Damages

Question 16

If C wants to rescind a contract due to fraudulent misrepresentation, what must they do?

Answer 16

Notify D of their intention to rescind, or;

Start proceedings in court

Question 17

What are 3 ‘bars to rescision?

Answer 17

1. C chooses to continue contract despite misrepresentation
2. laps of time
3. impossible/ not practicable

e.g: goods have perished/ changed in nature, new contracts have been entered into, bona fide third party has rights in the property

Question 18

If there has been a fraudulent misrepresentation, can C recover losses which flow the from the misrepresentation even if they were not foreseeable?

Answer 18

yes; remoteness not an issue

Question 19

If there has been a fraudulent misrepresentation, does C still need to take steps to mitigate?

Answer 19

yes

Question 20

Where there has been a negligent misrepresentation, C has 2 courses of action - what are these?

Answer 20

1. Common law - negligent misstatement
2. Statute - s(2) Misrepresentation Act 1967

Question 21

When would a party use MA 1967 instead of common law of negligent misstatement in a case of negligent misrepresentation?

Answer 21

Where there has been a contract between the parties.

Question 22

What are the 4 requirements for negligent misrepresentation under MA 1967?

Answer 22

1. false statement,
2. D believes false statement to be true
3. D made the statement carelessly/ without reasonable grounds for believing its truth at the time the contract was made.
4. C relied on this statement and suffered a loss

Question 23

What are the 2 main damages available for negligent misrepresentation?

Answer 23

1. rescission
2. Damages

Question 24

Is remoteness/ foreseeability applicable to negligent misrepresentation remedies?

Answer 24

no

Question 25

What is an innocent misrepresentation?

Answer 25

False statement + reliance + loss but misrepresentation was not fraudulent nor negligent.

Representor believed representation to be true and had reasonable grounds for this belief.

Question 26

What remedy is available for innocent misrepresentation?

Answer 26

rescission

no separate right for damages