Misrepresentation

Question 1

what is misrepresentation?

Answer 1

an unambiguous false statement of fact or law that is addressed by the representor to the representee which induces the representee to enter into the contract

Question 2

what is a representation?

Answer 2

a statement asserting the truth of a given state of facts - it may be precontractual inducing the party to contract

Question 3

what is the legal effect of a contract entered into as a result of misrepresentation?

Answer 3

the contract is voidable at the instance of the representee

Question 4

what 5 elements must exist to prove misrepresentation?

Answer 4

(1) unambiguous

(2) false

(3) statement of fact or law

(4) addressed by the representor to the representee

(5) which induces the representee to enter into the contract with the representor

Question 5

what does it mean for the statement to be unambiguous?

Answer 5

a reasonable person must have interpreted the statement to be clear and unambiguous (objective test)

the statement will only form the basis of a claim if it unambiguously has the meaning put forth by the representor

a representee cannot claim a statement is a misrepresentation if it interpreted it in an unreasonable way

Question 6

what is a ‘statement of fact or law’?

examples (5)

Answer 6

a statement asserting a given state of facts

examples:
- words (but not mere puff)
- conduct conveying a false impression (e.g., concealment of dry rot; inspecting a damaged item made to look perfect)
- statement of opinion or belief IF (a) D is in a better position to know the facts but there are no reasonable grounds for their opinion, or (b) D does not actually hold the opinion
- statement of intention only if D fraudulently does not have such intention
- silence (see later)

Question 7

when does a statement of opinion or belief amount to a false statement of fact and when does it not?

Answer 7

statements of opinion or belief are NOT misrepresentations if the representor:

(a) actually holds the opinion, and
(b) is not in a better position to know the facts than the representee - or is and there are reasonable grounds for their opinion

statements of opinion or belief ARE misrepresentations if the representor:

(a) is in a better position to know the facts (more knowledge / experience) and there are no reasonable grounds for their opinion, or
(b) does not actually hold the opinion

Question 8

when does a statement of intention amount to a misrepresentation and when do they not?

Answer 8

statements of intention amount to misrepresentation ONLY IF the representor fraudulently does not have such intention

statements of intention do not amount to misrepresentation if the representor does not fraudulently claim to have such intention

but note if intention changes before the contract, they must disclose such intention (but not if it changes after the contract)

Question 9

when does silence amount to misrepresentation? (3)

Answer 9

there is no obligation to disclose facts that might affect another party’s decision to contract - EXCEPT:

(1) giving half-truths - statements technically true but misleading

(2) if a true statement made during negotiations later becomes untrue before contracting, not correcting it is a false representation that the statement is true (duty to correct it)

(3) there is a duty to disclose material facts in some types of contracts (company/directors; trustee/beneficiary; insurance contracts) where one party is in a strong position to know the material facts

Question 10

what is meant by the requirement that. the false statement must be ‘addressed to the representee’?

Answer 10

the representor must specifically convey the false statement to the representee

AND

the representee must be aware of the statement BEFORE or AT THE TIME of contracting

Question 11

if, after the contract was concluded, a party discovers that they bought a damaged item that was made to look perfect, can they claim for misrepresentation?

Answer 11

no - the representee must have been aware of the false statement BEFORE entering into the contract

Question 12

what must be considered to establish whether the representee was induced to contract? (2)

Answer 12

(1) was the statement material?
- if yes = inducement is inferred - the burden then shifts to D to rebut the inference that C was subjectively induced
- if no = C must prove they were subjectively induced

(2) was C induced?
–> this is either proven by C or disproven by D depending on whether the statement was material

Question 13

what is a ‘material statement’?

Answer 13

a statement is material if:

(a) it would affect the judgement of a reasonable person in deciding whether or not to enter into the contract, OR

(b) it would induce them to enter into the contract without making such enquiries as they would otherwise make

(objective test)

Question 14

how is inducement established?

(2 different ways)

Answer 14

Either:
(1) the representee shows that the statement would have influenced a reasonable person to contract, and
(2) the representor cannot show that the statement did not influence this particular representee

OR:
The representee shows that it subjectively and personally was induced by the statement

Question 15

what causation test must be satisfied to prove that the representee was induced to enter into the contract as a result of the misrepresentation?

Answer 15

Fraudulent misrepresentation = causation is presumed

Non-fraudulent misrepresentation = the statement made a material contribution to the representee’s decision (no need to be the only reason for contracting)

Question 16

if the representee made his own investigations before contracting after a false statement, can they still claim misrepresentation?

Answer 16

yes - but this undermines their claim if they relied on the investigations rather than the representor’s statement

this does not undermine the claim if the misrepresentation is fraudulent

Question 17

if the representee should have conducted its own investigations (e.g., commercial context or representor offered), can they still claim misrepresentation?

Answer 17

yes but damages may be reduced to reflect contributory negligence

BUT no contributory negligence in fraudulent misrepresentation cases

Question 18

what are the 3 types of misrepresentation?

Answer 18

(1) fraudulent
(2) negligent
(3) innocent

Question 19

what is fraudulent misrepresentation?

Answer 19

the representor:
(1) knew the statement is false, or
(2) believed it not to be true, or
(3) was reckless as to whether it was true or false

the burden is on the claimant representee to prove the above

Question 20

what is negligent misrepresentation?

Answer 20

if the representee proves the statement is false, then the representor is liable for negligent misrepresentation

unless the representor can prove they:
(1) had reasonable grounds to believe and
(2) they did believe
that the statement was true up until they contracted

Question 21

what is innocent misrepresentation?

Answer 21

not fraudulent or negligent - so:

(a) representor proves they had reasonable grounds for believing the statement was true, and
(b) representor proves that they believed it up to the time of contract

Question 22

what remedies are available for misrepresentation? (3 types)

Answer 22

(1) Recission: contract is voidable unless the representee takes action to rescind it (available for all types of misrepresentation)

(2) Indemnity: awarded by court to cover expenses for obligations assumed under the contract only when there is no right to damages (innocent misrepresentation only)

(3) Damages: but the measure of damages and type of damages depends on the type of misrepresentation

Question 23

when will recission NOT be given as a remedy to misrepresentation? (4 cases)

Answer 23

(1) Affirmation by representee declaring their intention to proceed

(2) Delay in bringing the action

(3) Restitution is impossible - restoring parties to pre-contract position is not possible e.g., subject matter changed or declined in value

(4) Third party rights accrue as a person acquiring goods under a contract entered into via misrepresentation can still pass good title to an innocent third party without notice for consideration

Question 24

what type of damages are available for the representee in a fraudulent misrepresentation?

Answer 24

Damages to compensate C for losses directly flowing from the fraudulent inducement which is not too remote - regardless of whether the loss is foreseeable to D

the damages would be to place the innocent party in the position they would have been in had the misrepresentation not been made

note: contributory negligence defence is not available

Question 25

what type of damages are available for the representee in a negligent misrepresentation? (2 types)

Answer 25

(1) Damages to compensate C for losses directly flowing from the misrepresentation

(which are not too remote regardless of foreseeability to D - aiming to place C in the position C would have been in had the misrepresentation not been made)

(same as fraudulent misrepresentation BUT D can raise the defence of contributory negligence)

AND/OR

(2) Damages in lieu of rescission

(the court can award this if it decides not to rescind the contract - and may reduce the above type of damages accordingly)

Question 26

what type of damages are available for the representee in an innocent misrepresentation?

Answer 26

there is no automatic right to damages

but the court can award damages in lieu of rescission if it decides not to rescind the contract

Question 27

remedies for fraudulent misrepresentation

Answer 27

1- Rescission

2- Damages to compensate the claimant for loss directly flowing from the misrepresentation

Question 28

remedies for negligent misrepresentation

Answer 28

1- Rescission

2- Damages to compensate the claimant for loss directly flowing from the misrepresentation (with contributory negligence defence)

3- Damages in lieu of rescission

Question 29

remedies for innocent misrepresentation

Answer 29

1- Rescission

2- Damages in lieu of rescission

3- Indemnity