false preliminary statements made by a contracting party

Question 1

what can different types of statements in contractual negotiations be classified as?

Answer 1

a mere puff- obviously exaggerated- no right of action

an express term- part of contract- if untrue, innocent party will gave a remedy for breach

a representation- statement made by one party which may have induced the other to enter into it but doesn’t actually form part of the contract

Question 2

what does the specimen standard condition of sale say about excluding liability?

Answer 2

sellers sale representatives are not authorised to introduce any other terms into the contract or make any representation

Question 3

what is the primary test for whether a statement is a term or a representation?

Answer 3

common intention of the parties when they entered the contract i.e. did they intend it to be a contractual term?

Question 4

what must the court consider when determining whether a statement is a term or representation?

Answer 4

whether one party had greater skill/knowledge
whether the statement made verbally was repeated in a written contract before it was agreed
whether the recipient of the statement made clear it was of vital importance
whether the statement maker invited the other party to verify it
whether there was a lapse of time between the statement.being made and the contract being formed

Question 5

expand on relative skill and knowledge of the parties

Answer 5

of an expert makes a false preliminary statement to a non-expert, the statement may be considered a term but if this was the other way around (NE to E) it may be a representation

Question 6

expand on whether the statement made verbally was repeated in a written contract before agreement

Answer 6

this would be evidence that the statement was intended to be a tern but this is not conclusive e.g. Birch v Paramount even though the promise not written in contract it was still enforced in court (so the contract was party written and partly oral)

Question 7

expand on whether the recipient of the statement made clear it was of vital importance

Answer 7

will be deemed a term- Bannerman v White

Question 8

expand on whether the statement maker invited the other party to verify it

Answer 8

statement may just be representation Ecay v Godfrey BUT if one party tells the other not to verify it, it would be a term Schawel v Reade

Question 9

expand on whether there was a lapse of time between the statement being made and the contract being formed

Answer 9

longer the lapse, more likely it is a representation Routledge v McKay (there was a big interval between negotiations and contract)

Question 10

what happens if the statement is found to be an express term?

Answer 10

remedies for breach of contract or breach of statutory implied conditions so then will consider damages, possibility of rejection and possible additional remedies

Question 11

what happens if the statement is found to be a representation?

Answer 11

determine whether it amounts to a misrepresentation and if it does, consider remedies available

Question 12

what is a misrepresentation?

Answer 12

a false statement of fact made by one contracting party to the other before the contract was made and which was one of the factors which induced the other party to enter into it

innocent party must establish that a misrepresentation has occurred

Question 13

expand on there must be a false statement

Answer 13

can be oral, written or by conduct Spice Girls v Aprilia

Question 14

what does it mean to say that conduct should be distinguished from silence?

Answer 14

silence itself will not amount to misrepresentation Hamilton v Allied Domecq

Question 15

what are the exceptions to the rule that silence itself will not amount to misrepresentation?

Answer 15

where there is a fiduciary relationship between the parties e.g. solicitor and client, trustee and beneficiary

where the contract is one of the utmost good faith e.g. insurance contract

where there has been a half-truth i.e. where what was not said positively distorts what was actually said Curtis v Chemical

where a statement of fact is true when made, but a change of circumstances occurs before the contract is formed which makes the statement untrue- With v O’Flanagan

Question 16

expand on the false statement must be fact not opinion or intention

Answer 16

if opinion is not genuine, there are no reasonable grounds for the maker to believe it to be true, or if the statement is made by a person who is in the best position to know the true facts, there may be an implied false statement of fact which may amount to a misrepresentation if the other elements of the definition are satisfied

Smith v Land House- Statements of opinion are statements of fact if they fall within the knowledge of the representer but not the representee.

BUT

Bisset v Wilkinson- statement of mere opinion on the subject matter of a sale is not an actionable misrepresentation, provided that the parties understand it to not be made on any factual basis.

Question 17

expand on the statement must be made by one party to a contract to the other

Answer 17

if the maker of the statement is not the other contracting party, there cannot be a claim for misrepresentation- may be possible to bring a claim in tort for negligent misstatement or deceit

Question 18

expand on the statement must have been one of the factors which induced the party to enter the contract

Answer 18

statement doesn’t have to be the only reason why a party enters a contract provided it did encourage that party to do so Edgington v Fitzmaurice, but if party hired experts to verify the statement etc there is no misrepresentation Attwood v Small

BUT can still claim that a false statement induced them to enter the contract if they were given the chance to verify the facts but did not take it up Redgrave v Hurd

Question 19

who has the burden of proof for misrepresentation?

Answer 19

party who alleges that a misrepresentation has occurred

Question 20

what are the remedies for misrepresentation?

Answer 20

rescission, damages

Question 21

what is rescission?

Answer 21

when a misrepresentation occurs, the contract is valid unless/until the innocent party rescinds it- i.e. it is set aside or avoided

Question 22

how do you rescind a contract?

Answer 22

innocent party must notify the other, C can also apply to a court for a formal order or rescission if the other party wont cooperate

Question 23

what is the effect of rescission?

Answer 23

aim is to restore both parties as far as possible to their pre-contract positions, so if a contract is rescinded each party should return to the other any money or property transferred under the contract and are free from future obligations

Question 24

what are the bars to rescission?

Answer 24

it’s an equitable remedy so the right to rescind will be lost in certain situations i.e. there will be a bar

where a bona fide purchaser has acquired rights in the property
affirmation
undue delay
where restitution is impossible i.e. to restore goods or property

Question 25

expand on affirmation as a bar to rescission

Answer 25

can be express or implied, if someone knows about the misrepresentation but indicated that they were treating the contract as continuing, she could be regarded as affirming the contract and lose her right to rescind

Question 26

expand on undue delay

Answer 26

leaf v international galleries- right to reject the goods for breach of a condition of the contract would have been barred as the C has the chance to examine the picture within a few days of purchase, so a delay of 5 years meant there could be no rescission in calculating delay, the court doesn't necessarily look at when it was discovered, but when it should have been discovered

Question 27

expand on where it is impossible substantially to restore goods or property

Answer 27

restoration doesnt have to be exact Erlanger v New Sombrero- a court can take into account profits and make allowance for deterioration, but it cannot restore the parties precisely to the state they were in before the contract

Question 28

what is indemnity?

Answer 28

if a contract is rescinded, the innocent party can claim on indemnity for expenses necessarily incurred as a result of entering into the contract- it is restricted an is only available as part of rescission

Question 29

when is indemnity likely to be claimed?

Answer 29

in a situation where the C has no rights to damages

Question 30

what are damages in lieu of rescission?

Answer 30

where C asks court for an order or rescission, the court may award damages in lieu of rescission under s2(2) of the Misrepresentation Act 1967 but only if it is non-fraudulent and the C has no rights to damages, the court has a discretion to award damages in lieu of rescission

Question 31

when are damages awarded?

Answer 31

in addition to either rescinding or affirming, depends on whether the misrepresentation was fraudulent or not

Question 32

what are damages for fraudulent misrepresentation?

Answer 32

if the innocent party can prove that the misrepresentation was made fraudulently they can sue for damages in tort of deceit- must show that the false representation was made knowingly or without belief in its truth or recklessly careless whether it be true or false

Question 33

what are damages for non-fraudulent misrepresentation?

Answer 33

C may ask for damages under the s2(1) of the misrepresentation act 1967 and must show that there was a misrepresentation that caused loss and are awarded in accordance with tort principles Royscot Trust v Rogerson, damages should be awarded the same way as damages for fraudulent misrepresentation in the tort of deceit- the usual foreseeability rule does not apply

Question 34

when can s2(1) be used?

Answer 34

only by a party to a contract against the other contracting party- i.e. where a person entered it after a misrepresentation has been made to them by another party

Question 35

who has the burden of proof for s2(1)?

Answer 35

party making the misrepresentation as D must prove that the they had reasonable grounds to believe the facts were true otherwise they will be liable to pay damages

Question 36

who has the burden of proving reasonable grounds for belief?

Answer 36

on the party making the statement and this is difficult to do Howard Marine v Ogden

Question 37

what are negligent misstatements?

Answer 37

not limited to a statement of fact- can also be a statement of opinion and not limited to a false statement made by the other contracting party

Question 38

what are advantages for suing for negligent misstatement?

Answer 38

statement doesn't have to amount to a misrepresentation as such, i.e. there doesn't have to be a contractual relationship between the parties and the statement need not be one of fact BUT usually better to bring action under s2(1) of MA 1967 as burden of proof is on D and damages are better