Misrepresentation

Question 1

What is a ‘representation’?

Answer 1

A statement asserting the truth of a given state of facts

Question 2

How is an actionable misrepresentation defined?

Answer 2

An unambiguous false statement of fact made to the claimant which induces the claimant to enter into the contract with the statement maker

Question 3

What must be present for an action in misrepresentation to succeed?

Answer 3

All elements of the definition

Question 4

What are the five elements of an actionable misrepresentation?

Answer 4

Unambiguous
False
Statement of fact
Made to the claimant
Inducement

Question 5

How is ‘unambiguous’ interpreted?

Answer 5

Must be clear; cannot be interpreted unreasonably by the representee

Question 6

How is ‘false’ interpreted?

Answer 6

Not false if ‘substantially correct’: meaning that the difference between what is represented and what is correct wouldn’t induce a reasonable person to enter a contract

Question 7

How is ‘statement of fact’ interpreted?

Answer 7

A statement asserting a given state of affairs

Question 8

How is a representation distinguished from ‘mere puff’?

Answer 8

Advertising language / description is not a misrep.

Question 9

Can statements of fact be made via conduct?

Answer 9

Yes - e.g. intentional concealment of a defect

Question 10

Can a statement of law give rise to an actionable misrep.?

Answer 10

Yes

Question 11

What three categories are generally not actionable?

Answer 11

Statements of opinion
Statements of future intention
Instances of silence

Question 12

How is ‘inducement’ established?

Answer 12

Step One: Objective Test

Would the statement have influenced the reasonable person?

If yes - defendant must prove it didn’t influence the claimant

If no -

Claimant must prove that they were subjectively induced

Question 13

In what cases will there be no actionable misrepresentation?

Answer 13

When the statement is not actually communicated to claimant

When statement did not affect the representee’s decision to enter the contract

When the statement is known to be untrue by the representee

Question 14

Does the misrep need to be the only reason the claimant enters the contract?

Answer 14

No - can be one of many factors

Question 15

Is misrep actionable when the claimant tests validity by investigating the representations themselves?

Answer 15

No - a party cannot bring a claim in misrepresentation when it has relied not on the misrepresentation but on its own investigations.

Question 16

What is the crucial point about independent investigations?

Answer 16

It is not whether or not they have been made; it is whether or not they have been relied upon.

No general duty to check and enquiries do not automatically block a misrep claim.

Question 17

What defence does conducting independent checks open up?

Answer 17

Contributory negligence [cannot be pleaded if misrep is fraudulent]

Question 18

When can a statement of opinion be considered a statement of fact?

Answer 18

When the representor has significantly more knowledge / experience than the representee.

This is because it is implied that you have the facts to back up this opinion.

Question 19

Can a future promise be a misrep?

Answer 19

No, unless at the point in time they make the promise they know that they cannot do what they state or do not intend to do it at all.

Question 20

What are the three exceptions to the general rule to disclose?

Answer 20

Half-truths
Continuing representations
Contracts uberrimae fidei

Question 21

What is a ‘half truth’

Answer 21

A statement which is technically true but misleading - can be a misrep

Question 22

Why can a continuing representation be a misrep?

Answer 22

Because if a statement made at the start of negotiations becomes false there is an obligation to correct it.

Question 23

What are contracts uberrimae fidei?

Answer 23

Insurance is most standard example but also company and directors, trustee and beneficiaries of a trust

Question 24

What are the three categories of misrepresentation?

Answer 24

Fraudulent (tort)
Negligent (statutory under S2(1) MA)
Innocent “”

Question 25

How is fraudulent misrep defined?

Answer 25

False rep made knowingly, without belief in its truth, recklessly Motive is immaterial

Question 26

How is recklessness defined?

Answer 26

Flagrant disregard for the truth - must be more than an inadvertent failure to disclose

Question 27

Who bears the burden of proof in fraudulent misrep?

Answer 27

Claimant - and this is a difficult one to discharge

Question 28

When is someone liable for negligent misrepresentation?

Answer 28

Someone is liable unless they can prove that they had reasonable grounds to believe, and did believe, that the statement was true

Question 29

If someone is found liable for negligent misrep, how are they treated?

Answer 29

As if they have made a fraudulent misrep - important re damages.

Question 30

Where does the burden of proof lie for negligent misrep?

Answer 30

The defendant must prove that they had reasonable grounds to believe their statement and did believe their statement.

Question 31

What are the components of an innocent misrepresentation?

Answer 31

The defendant proves that they had reasonable grounds for belief in the truth of their statement Proves that they believed up to the time of the contract that what they were saying was true

Question 32

From a remedies perspective, what is the effect of misrepresentation?

Answer 32

Renders the contract voidable but not void

Question 33

What must the representee do in order to rescind the contract?

Answer 33

Communicate this to the representor, or start court proceedings

Question 34

What type of remedy is rescission?

Answer 34

Equitable - at the discretion of the court

Question 35

What are the four key bars to rescission?

Answer 35

Affirmation Lapse of time Restitution is impossible 3rd party rights accrue

Question 36

What can be awarded if obligations have emerged as a direct result of the contract?

Answer 36

An indemnity - likely to be awarded for an innocent misrepresentation as damages aren't available as of right

Question 37

How are damages calculated for fraudulent misrepresentation?

Answer 37

On a tortious basis e.g. placing the innocent party in the position they would be in had the misrepresentation not been made. "All damage flowing directly from the tortious act" Claimant must mitigate as soon as fraud is discovered Damages reduced by any benefit accrued.

Question 38

Is contributory negligence available as a defence for fraudulent misrepresentation?

Answer 38

No

Question 39

How are the damages calculated for negligent misrep?

Answer 39

The same basis of fraudulent misrep

Question 40

Is contributory negligence available as a defence for negligent misrepresentation?

Answer 40

Yes

Question 41

What remedies are available to innocent misrep?

Answer 41

Only rescission and an indemnity if relevant

Question 42

When can the court award damages in lieu of rescission?

Answer 42

For negligent and innocent misrep only; if more equitable / rescission impossible

Question 43

What is the difference between S2(1) and S2(2) MA damages?

Answer 43

S2(1) - damages compensating the claimant for loss flowing from the misrepresentation S2(2) - compensate where rescission has not been awarded

Question 44

Can misrepresentation be excluded via an exemption clause?

Answer 44

Only in so far as it is reasonable

Question 45

What is a sensible clause to include to mitigate issue of misrep?

Answer 45

Non reliance clause; still subject to reasonableness test likely