LAW P3 CONTRACT (MISREPRESENTATION)

Question 1

What is misrepresentation?

Answer 1

A misrepresentation is a false statement of fact or law which induces the representee to enter a contract.

Where a statement made during the course of negotiations is classed as a representation rather than a term, an action for misrepresentation may be available where the statement turns out to be untrue.

Question 2

What are the 3 types of misrepresentation?

Answer 2

• Innocent misrepresentation
• Negligent misrepresentation
• Fraudulant misrepresentation

Question 3

What is innocent misrepresentation?

Answer 3

An innocent Misrepresentation exists where the representor can demonstrate reasonable grounds for belief in the truth of the statement.

Question 4

What is negligent misrepresentation?

Answer 4

A negligent misrepresentation is a statement made without reasonable grounds for belief in its truth. The burden of proof being on the representor to demonstrate they had reasonable grounds for believing the statement to be true.

CASE - Howard Marine v Ogden, the defendant had not discharged the burden of proof by demonstrating they had reasonable grounds for believing it to be true.

Question 5

What is fraudulant misrepresentation?

Answer 5

Lord Herschell defined fraudulant misrepresentation in Derry v Peek as a satement which is made either: knowing it to be false, withoutout belief in its truth, or recklessly careless as to whether it be true or false.

CASE - Doyle v Olby, where a party is induced to enter into a contract by fraudulent misrepresentation, they are entitled to be put in the position they would have been in had the misrepresentation not been made

Question 6

What are the requirements to claim misrepresentation?

Answer 6

In order to amount to an actionable misrepresentation there must be:

• A false statement
• Inducement/reliance

Question 7

What is false statement?

Answer 7

There must be a false statement of fact or law as oppose to opinion or estimate of future events.

CASE - Edgington v Fitzmaurice, a statement of future intention can be treated as a misrepresentation of fact

Question 8

What is inducement/reliance?

Answer 8

Once it has been established that a false statement has been made it is then necessary for the representee to demonstrate that the false statement induced them to enter the contract.

There can be no inducement or reliance if the representee was unaware of the false statement.

CASE - Bisset v Wilkinson, a statement of opinion is not a misrepresentation unless the person making it expresses it as a fact

Question 9

What are the remedies for fraudulant misrepresentation?

Answer 9

Where there has been a fraudulant misrep, the innocent party is entitled to rescind the contract and claim damages. The damages that are awarded are not based on contractual principles but the damages available in the tort of deceit. There is therefore no requirement that the damages are foreseeable.

CASE - Smith New Court Securities v Scrimgeour Vickers, A person who is fraudulently induced to enter a contract is entitled to be compensated for all the loss directly flowing from the transaction, even if it was not foreseeable

Question 10

What are the remedies for negligent misrep?

Answer 10

The same remedies are available where the statement was made negligently as if it were made fraudulantly. The innoncent party is entitled to rescind the contract and claim damages.

CASE - Royscott Trust v Rogerson, damages should be assessed on the basis of damages available in the tort of deceit principles.