Misrepresentation Flashcards

Question

An inducement suffices, need not be the only one cases (2)

Answer 1

Smith v Eric S Bush [1990] Edgington v Fitzmaurice [1885]

Answer 2

1) Fraudulent Misrepresentation 2) Negligent Misrepresentation 3) Innocent Misrepresentation

Answer 3

Derry v Peek (1889) A) Knowingly B) Without belief in its truth, or C) Recklessly, careless as to whether it is true or false

Answer 4

• Tramway company • Special act for the company • Act said carriages would be move by horsepower • Said, if they got consent, they could you steam power instead • D bought shares with the knowledge that they were changing to steam power • D brought an action • Court: not enough to just establish a false statement • Must also establish liability on the defendant • Defendant must know he is not telling the truth • P was not acting acting fraudulent o They honeslty believed they were changing

Answer 5

a Fraudulent misrep must be • False • Made knowingly • Made wrecklessly

Answer 6

Negligent misrep

Answer 7

* Was a firm of ad agents * Wanted to work for Easy power * Wanted to make sure they could pay * Easy power’s bank was Heller * Heller said they were good * Hedley relied on this statement * Hedley lost money in unpaid bills * Court: * if you are in a position in responsibility, you have a duty of care. * You must make sure that your statements are accurate * Was there a special relationship between the 2 parties * Problem: they were not entering into a contract with each other * Requirements for tort of negligence: * A) Person making statement knows that party relying on it will rely without further enquiry * B) Person making the statement is aware of the purpose for which the statement is required * C) Reasonable for innocent party to act on statement without further enquiry * D) Statement acted on to innocent party's detriment * E) Reasonable person in that situation would not have made the statement

Answer 8

5 requirements for Tort of Negligence misrep * A) Person making statement knows that party relying on it will rely without further enquiry * B) Person making the statement is aware of the purpose for which the statement is required * C) Reasonable for innocent party to act on statement without further enquiry * D) Statement acted on to innocent party's detriment * E) Reasonable person in that situation would not have made the statement

Answer 9

* Post Hedley v Heller * M hired E for a period of 3 years * M did what he could to sell more petrol, but still lost money * E tried to take the site back from M * M said E made a misreprersentation about how much petrol he would sell in a year * Court said it was misrepresentation * who knows better than E * E are experts, in a much better position to know

Answer 10

Statement of opinions or belief may be a misrepresentation if the person is a expert or in a position to know

Answer 11

Newbigging v Adam (1866) | Whittington v Seal Hayne (1900)

Answer 12

* N was induced to enter a partnership contract by misrepresentation * Was it innocent or not? * Court said remedy for innocent misrepresentation is rescission of the contract

Answer 13

Innocent misrep | •Court said remedy for innocent misrepresentation is rescission of the contract

Answer 14

Damages (common law) Rescission of the contract

Answer 15

No Unless it has become a term of the contract

Answer 16

Tort (where misrepresentation was fraudulent or negligent) Under ss. 2(1), 2(2) Misrepresentation Act 1967 (includes for innocent misrepresentation)

Answer 17

try to put X into position he was in before the contract, and trying to ensure X is not unjustly enriched at Y’s expense, i.e. contract set aside both retrospectively and prospectively

Answer 18

Yes - In tort or s.2 Misrep Act 1967 Not for breach of contract

Answer 19

1) Rescind contract OR 2) Affirm contract + Seek Damages Car & Universal Finance v Caldwell [1965] Inntrepreneur Pub Co (CPC) Ltd v Sweeney [2002]

Answer 20

• D sold his car to a man called Norris (rogue) • Paid by cheque, bounced • Norris sold car to P • D found out and wanted his car back • Both innocent parties • Was there a rescission in the original contract between D and Norris • It was voidable because of the fraudulent misrep • Because D did everything he could to get out of the contract o Title cannot be passed to P • Rescission has happened o P does not own the car o Still belongs to D • Stage the contract was rescinded Is really important

Answer 21

Islington BC v. UCKAC (CA 2006) X (the misrepresentor) must be made aware that Y is rescinding the contract

Answer 22

* Affirmation of the contract, * Third party rights intervening * Lapse of time •Impossibility of restitution (ex: car is no longer driveable) •Misrepresentation Act 1967 s2(2) More equitable to award damages

Answer 23

Tort of Deceit Tort of Negligence s. 2(1) Misrepresentation Act 1967 s. 2(2) Misrepresentation Act 1967

Answer 24

Tort of Deceit

Answer 25

A) Representor made a misrepresentation B) Representation was made fraudulently C) Representor intended that representee (or someone in his position) should act upon it D) Representee did act upon it and suffered loss by so doing

Answer 26

Tort of Negligence s. 2(1) Misrep Act 1967 - Damages are better under the Act

Answer 27

Hedley Byrne & Co Ltd v Heller Partners Ltd (1964) A) Person making statement knows that party relying on it will rely without further enquiry B) Person making the statement is aware of the purpose for which the statement is required C) Reasonable for innocent party to act on statement without further enquiry D) Statement acted on to innocent party's detriment E) Reasonable person in that situation would not have made the statement

Answer 28

1. Fiction of Fraud - Ask, if misrepresentor knew it was untrue, would it be misrepresentation 2. The other party of the contract must be the one who committed the misrepresentation 3. Shift of the burden of proof - It shifts to the representor to prove they had reasonable belief in the truth of the statement - If innocent misrep, he will be able to prove why he thought that 4. Has to be loss suffered - An actual loss

Answer 29

o O wanted to hire 2 barrages from H o H wrote a letter about the cost o O wanted to know how much they could carry o H said wrong answer, based on a recollection o Real weight was less o Court said it was misrepresentation under the Act • Places a high burden on the defendant

Answer 30

Reverse burden of Proof for s. 2(1) Misrep Act 1967

Answer 31

s. 2(2) Misrepresentation Act 1967

Answer 32

Traditionally, no damages; rescission only: •De Lassalle v. Guildford •if innocent misrepresentation, discretion of court to order damages in lieu of rescission Cannot receive both rescission and damages

Answer 33

Principles for exercise of court’s discretion under s.2(2): very wide •William Sindall PLC v. Cambridgeshire CC

Answer 34

• W agreed to buy development land from C • Before the sale was complete, asked if there were rights of easements or any public rights affecting the land • C said, as far as they are aware, there are no rights affecting the property other than those in the contract • Sale was completed • W later discovered a private foul sewer that was built on the land in the 1970s • Argued C made a misrepresentation and brought an action for the contract to be rescinded • Held: o No misrepresentation by C o But if there was any, damages would be awarded under s.2(2) of the Misrepresentation Act 1967 • No rescission

Answer 35

No misrepresentation by C But if there was any, damages would be awarded under s.2(2) of the Misrepresentation Act 1967 • No rescission

Answer 36

Thomas Witter Ltd. v. TBP Industries Ltd. Floods of Queensferry Ltd. v. Shand Construction Ltd.

Answer 37

•Is it a misrepresentation? •What type of misrepresentation? Fraudulent, negligent, innocent •Remedies oRescission oDamages oTort of deceit vs tort of negligence vs Misrepresentation Act 1967, 2(1) or 2(2) oPossible contract claim? (breach?)

Answer 38

* maker of statement accepts (or appears to accept) obligation to do or not to do something * Becomes a term of the contract * If broken, it is a breach of contract claim

Answer 39

* statement asserting a given state of facts is true | * Misrepresentations are not part of the contract

Answer 40

• W traded in old car and got new one from O • W described car as 1948 Morris, according to manual • It was really a 1939 model • Difference in value was about £115 • Not W’s fault • Someone else altered log book to say 1948 • Was it a representation? • They were both mistaken, but no • If it was a breach of contract • If condition, allowed to terminate contract • If warranty, only payment for money damages • It might be a misrepresentation • W didn’t know the truth • Would be an innocent misrepresentation o Only remedy for this is the payment of damages • Held: W is not an expert • If it was the car dealer (expert), he had a reason to know • Objective test, o Not misrepresentation • Not a breach of contract

Answer 41

* H sold D a car * Said it had about 20,000 miles since last service * Reality, a lot more than that * Was it part of the contract or side representation? * Objective test applied * Held: intended to be a representation

Answer 42

* Purchase of a farm * 3 parts of land * 1 part was called fertile and improvable * Court held that it was just a Puff. * Made statement about tenants * Was false * Was this a mirepresentation? * Held: yes

Answer 43

* L signed an insurance proposal form for jewelery * Didn’t ask about previous convictions * She didn’t say anything, her husband was convicted of theft in the past * One of the terms of the insurance policy stated that if omitted facts, contract will be void * Husband was convicted again afterwards * L didn’t say anything again * Later, their jewelery was stolen * Claim was turned down * Hadn’t disclosed her husband’s conviction * Held: the later conviction was enough to invalidate the insurance claim * It was a fraudulent mirespresentation

Answer 44

* G entered into contract with S to buy 99 yr lease on a flat * Wasn’t in good condition * Reason was because of Dry Rot * S painted over the dry rot * G got a survey of the property * Didn’t find dry rot * Survey said they cant guarantee that there was no dry rot * Was painting over the dry rot a misreprentation? * Held: it was a fraudulent misrepresentation * Knew it was there * Attempted to conceal it

Answer 45

Mere Puffs are not representations

Answer 46

* E was shareholder * Received a circular addressed to him that requested loans * F bought a lease and needed money to improve the property * None of this was true * Circular was misleading * It was an attempt to not go bankrupt * Was this misrepresentation? * Argued it was merely a statement of intention * Court so no, it was not intention * It was a lie * Misrepresentation was present

Answer 47

A lie about the facts will be a misrepresentation

Answer 48

• S got a copy of a survey report • E prepared the report • S relied on the survey • Chimney was in a bad state • Contract had a clause they attempted to limit the liability of the surveyor • Was there an actionable misrepresentation by sayin the chimney was ok • Court said 4 factors: o Bargaining power of the parties (who has more) o The practicality of getting alternative advice (how practical was this) o How difficult was the task being undertaken? o What are the practical consequences of the decision? • Court: loss should be beared by surveyor • Was an actionable misrepresentation o Surveyor was more likely to be insured than S o We want surveyors to tell the truth

Answer 49

An inducement suffices: need not be the only one Court created 4 factors o Bargaining power of the parties (who has more) o The practicality of getting alternative advice (how practical was this) o How difficult was the task being undertaken? o What are the practical consequences of the decision?

Answer 50

o Bargaining power of the parties (who has more) o The practicality of getting alternative advice (how practical was this) o How difficult was the task being undertaken? o What are the practical consequences of the decision?

Answer 51

o sale of a gun o buyer didn’t look at it o seller tried to conceal a defect in the gun o would had been an actionable misrepresentation, but buyer didn’t look at it

Answer 52

C cannot show the misrep induced the contract if he did not know of the misrep Representation did not induce the contract

Answer 53

``` o involved a sale of a mine o various statements were made o buyers checked statements with own experts, knew it was untrue o bought the mine anyway o tried to later get out of contract o court said no ```

Answer 54

C cannot show the misrep induced the contract if he knew it was untrue

Answer 55

``` o R was a solicitor, wanted a partner o H applied o H said he had clients worth a lot of money o Wanted proof o H produced a stack of papers o Didn’t really look through it o Info was false o Court said it was not a misrepresentation ```

Answer 56

C cannot show the misrep induced the contract if he did not allow the misrep to affect his decision

Answer 57

• D bought business from O • Several fraudulent claims made about the business • IT was a fraudulent misrepresentation • he knew he wasn’t telling the truth • Damages o Might be a breach of contract in addition to the misrepresentation (important) o Contractual damages are separate from misrepresentation damages

Answer 58

* IT was a fraudulent misrepresentation | * he knew he wasn’t telling the truth

Answer 59

* Car dealer and finance company * Car dealer induced company into a higher agreement * Company sued dealer for misrep * Dealer was liable for all of the losses * Under the Act, damages are better because you get all losses that are suffered

Answer 60

damages are better under the Act than in common law

Answer 61

``` •involves hair salons •M owned 2, agreed to sell one to E •M wanted to go abroad •E assumed there would not be as much competition •M didn’t go abroad •E lost money •Was this a misrep by M? oDid he lie? ``` •Court said yes, he lied o But the appeal was about how much damages o Must look at profits that E would have made if M didn’t take all of his clients

Answer 62

Damages for fraudulant misrep o Must look at profits that E would have made if M didn’t take all of his clients Aim: put X into position he would have had if tort not committed

Answer 63

* if both parties are negligent, but one is more than the other * amount of damages awarded is reduced to reflect that fact * if using tort of deceit, don’t reduce the damages

Answer 64

``` • Involves carpets • Manufacturers have audit accounts • There was an one off expense • Made it look more profitable than it actually was • Not £120,000, but really £50,000 • What kind of misrep is this? o Reckless o Negligent misrepresentation o Turned into innocent misrepresentation • Rescission was no longer available o Damages? • Held: o They could recover damages ```

Answer 65

if X had right to rescind, but has lost it: He can still collect damages Contradicts : Floods of Queensferry Ltd. v. Shand Construction Ltd

Answer 66

• Held: o Can only get damages if it is possible to rescind that contract • Is this equitable? o Not fair to give damages if they cannot have rescission

Answer 67

``` • P had poultry on their farm • Induced to enter a lease with D • Misrep that the property was sanitary o Not true, water was poisoned o Poultry fell ill and died • Can the lease be rescinded? • What about rates to the local authority? • What can be recovered? • Held: o Recover rent, rates, but not consequential loss • Removal expences, loss of profits, medical expenses, and loss of poultry o Only direct loses o They would of unjustly benefited the P ```

Answer 68

Innocent Misrep | Damages instead of rescission (impossible)

Answer 69

• D were promoters of phosphate company • Sold to P for £110,000 • Tried to rescind the contract • Argued there was a duty to disclose that they bought the mine a few days earlier for £55,000 • Argued Cannot rescind because they were working the mine • Held: o P was entitled to rescind the contract o Did have to give up the profits made by working the mine o Must be actual destruction of the subject in matter

Answer 70

Impossible to rescind if subject in matter is destroyed

Answer 71

• P bought a painting • It was misrepresented that the painting was from Constable • Did not discover this until 5 years later • Held: o Can no longer be rescinded because this lapse was too long o Only claim he could make for damages, but did not ask for it

Answer 72

o Can no longer be rescinded because this lapse was too long o Only claim he could make for damages, but did not ask for it Lapse of time

Answer 73

• D advertised a lorry for sail, said it was exceptional condition • False, there were many issues • P reported issues to D • D agreed to pay for some repairs • Next day, P went out again and it broke down • P wanted money back • Entitled to rescission? • Held: o By asking for repair money, he affirmed the defect o Amount to affirmation of the contract

Answer 74

o By asking for repair money, he affirmed the defect | o Amount to affirmation of the contract

Answer 75

Not for fraudulent misrep Yes, for negligent and innocent misrep s. 3 Misrep Act 1967 Term must be reasonable under s.11(1) UCTA 1977 Walker v Boyle

Answer 76

* P negotiated with D to purchase her house * P sent various inquiries to D with many questions * Are you aware of any disputes regarding boundaries or anything of that nature? * D asked her husband, he said no * But there was one with a neighbor * D thought it was settled * Was this actionable misrep? * Condition said they could not get out of sale because of the misrep * Held: * Used s. 3 * Not reasonable * Sale annulled

Answer 77

Possible to limit liability for misrep under s.3 Misrep Act 1967 Reasonableness test s. 11(1) UCTA 1977

Answer 78

o H&S were rubber merchants who were underwriting shares of what they called a rubber company o B called H about shares o Manager states that they were “bringing out a rubber company” o Based on this statement, B purchased a large number of shares o Shares weren’t for a rubber company, did very poorly o B sued for breach of warranty o Held: • B succeeded at trial • Innocent misrepresentation gave no right to damages

Answer 79

Innocent misrep gave no right to damages

Answer 80

• Z wanted to buy a jet from B • Entered into a contract with a finance company, who purchased the jet and leased it to Z • Plane had issues • Returned to B for repairs, but issues remained • Z stopped paying instalments • Finance company took possession and sold the plane • Z brought an action to rescind the contract and get damages • B made misrepresentation about jet • B claimed rescission was impossible, jet had been sold • Held: o Z had no right to rescission or damages • Plane had been sold (cannot rescind) • S.2(2) damages were unavailable because they depend on the right to rescind the contract • Only available as a substitute for rescission

Answer 81

* S.2(2) damages were unavailable because they depend on the right to rescind the contract * Only available as a substitute for rescission