Chapter 5 - Misrepresentation Flashcards
What is a void contract?
One which never existed. No rights or duties can be passed under a void contract.
What is a voidable contract?
One which will continue to exist unless one of the parties choses to bring it to an end (rescinds it).
Will a contract induced by misrepresentation be void or voidable? Give the case law in which Lord Reed confirms this.
Voidable, as per Cramaso LLP v Ogilvie-Grant [2014]. It will be for the victim of the misrepresentation to attempt to rescind the contract.
What is misrepresentation?
A false statement of fact or law made by one party with the intention of inducing the other party to enter into a contract.
In which case did Lord Campbell state that a misrepresentation does not have to be in words?
Walters v Morgan [1861] “a nod or a wink or a shake of the head will suffice”.
Which three matters will not normally be considered misrepresentation and give supporting case law.
Statements of opinion (Bissett v Wilkinson [1927]) / Statements of intention (unless stating intention of doing something you do not intend to do, as in Edgington v Fitzmaurice [1885]) / Extravagant advertisements and sales talk (unless claiming to be based on facts such as Carlill).
What is the exception to the general principle that statements of opinion will not normally be considered misrepresentations and give the case law this was provided in.
In Smith v Land and House Property Corp [1884], Bowen LJ said “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 material fact”. This was applied in modern case of Cherrilow Ltd v Butler-Creagh [2011] (property developer stated incorrect value estimate or property).
What is the maxim of caveat emptor and how does it affect contracts and the rules regarding silence and misrepresentation? Give a case law example.
It means “let the buyer beware”, it is a buyer’s responsibility to find out about goods before committing to a contract and therefore silence does not normally amount to misrepresentation as there is no obligation to disclose relevant facts unless a party has specifically asked (as per Keates v The Earl of Cadogan [1851]).
What is a case law example of the application of the maxim caveat emptor?
Sykes v Taylor-Rose [2004]
What are the six exceptional circumstances in which a contracting party is obliged to disclose information to the other party, even if they are not asked?
When one party has told a ‘half-truth’ which may give a false impression to the other party (Nottingham Patent Brick and Tile Co v Butler [1886]) / When circumstances change before the contract is agreed (With v O’Flanagan [1936]) / Contracts of the utmost good faith impose an obligation to reveal all relevant facts / Parties have a fiduciary relationship such as lawyer and client when they expect full disclosure / if there was a voluntary assumption of responsibility on the silent party which the other party relies on / if a business staying silent in commercial practice would lead a consumer to take a transactional decision they would not otherwise take (provided for by reg 6 Consumer Protection for Unfair Trading Regulations 2008)
Insurance contracts are contracts of the utmost good faith, in which all facts should be disclosed. What is the Act which provides for this and describe the provisions of the two key sections?
Consumer Insurance (Disclosure and Representations) Act 2012. Under s2(2) the consumer must take reasonable care not to make a misrepresentation to the insurer and under s2(3) failure to comply with an insurer’s request to confirm or amend particulars previously given is capable of being a misrepresentation.
What is inducement?
When a representor intends a false statement to induce the other party to enter the contract, and succeeds in doing so.
How would a representee prove they have been induced into a contract by negligent or innocent misrepresentation? Give a case law example.
They would have to show that ‘but for’ the misrepresentation, they wouldn’t have entered into the contract (BV Nederlandse Industrie v Rembrandt Enterprises [2019]).
Will a representee be induced if they were unaware of the existence of false statements at the time of entering the contract? Back up with case law.
No, Re Northumberland and Durham Banking Co [1858]
What happens if a representee knows a statement is false but decides to contract anyway?
They cannot meet the ‘but for’ requirement and so cannot claim negligent or innocent misrepresentation.
Will a false statement induce if there is evidence to show the representee did not believe the representation and conducted their own investigation? Back up with case law.
No, as per Attwood v Small [1838]
If a representee does not make effort to check the truth of a statement, can they still sue for negligent or innocent misrepresentation and why? Back up with case law.
Yes they can because not researching it shows reliance on the statement (Redgrave v Hurd [1881]). Further, it must also have been reasonable for the representee to rely upon the statement and not undertake further research (Smith v Eric S Bush [1990])
What are the four key differences in respect of inducement in fraudulent misrepresentation cases?
The representee does not need to meet a ‘but for’ test, as per Atwood v Small they just need to prove they were induced ‘in any way’ (material inducement) / A claimant will succeed if they can show they were influenced by the misrepresentation, even if they did not believe it (Hayward v Zurich Insurance Co plc [2016] / the representee has the burden of proof of inducement but has the benefit of a rebuttable presumption that the fraud was a material inducement (BV Nederlandse Industrie v Rembrandt Enterprises [2019] / The presumption is very difficult to rebut (BV Ned)
What are the three different types of misrepresentation?
Fraudulent, innocent and negligent.
What are the three main tests to determine if a misrepresentation is fraudulent, defined in Derry v Peek [1889]?
if a knowingly false statement was made / the statement is made without belief in its truth / the statement is made with reckless carelessness as to whether it is true or false.
What remedy/remedies are available for fraudulent misrepresentation?
Damages and rescission
How are damages awarded in fraudulent misrepresentation cases and what case confirmed this?
They are awarded on a tortious basis which aims to put the claimant in the position they would have been in but for the misrepresentation. This was confirmed by Smith + New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1996]
In Doyle v Olby (Ironmongers) Ltd [1969] Lord Denning stated that claimants could potentially recover all damages from fraudulent misrepresentation, provided they prove what?
That the misrepresentation caused the loss claimed for.
What is the aim of rescission and how can this be achieved?
To put the parties back into the position they were in before the contract was made. This can be done by returning any goods or money exchanged and possible reimbursement of any expenses incurred as part of the contract.
