Misrepresentation Flashcards
(13 cards)
Definiton and outcome of misrepresentation
Definition = an unambiguous false statement of existing fact, made to the claimant, which induces them to enter the contract
Outcome = rescind the contract or get expectational damages
Key statute
Misrepresentation Act 1967
- s.1 removes the bars of rescission, (a) if the misrepresentation has become a term and (b) even after performance, you can rescind, even if no fraud
- s.2(1) = there is an option to get damages, even with no fraud, based on whether there was a misrepresentation, and a loss suffered
- s.2 (1) = ‘get out’ clause – if you have reasonable grounds to think the statement was true, then there is no misrepresentation
- s.2 (2) = it is at the court’s discretion to rescind the contract, if the court believes the contract to be equitable, they may award damage instead
Bars to recession
Bars to rescission
= impossibility of mutual restitution, affirmation, lapse of time, third party rights, and inequity
Caselaw
Requirements of an actionable misrepresentation
- Must have been made to the claimant or to a third party with the intention that it be passed on to the third party [Smith v Eric Bush]
- Inducement = the claimant must prove that the misrepresentation caused them to enter the contract – they would not have entered the contract ‘but for’ the misrepresentation [Assicurazioni Generali v Arab Insurance]
- vs. In fraud the representation need only be ‘one of’ their reasons [Edgington v Fitzmaurice]
Caselaw
A statement of fact
- Walters v Morgan = non-verbal statement of fact - ‘nod, wink, shake of the head’ and so on
- Spice Girls v Aprilia World Services = implied statement of fact – the band had made an implied misrepresentation of conduct as the company did not know of their intention to split up, and the advert was based on them being a group
Caselaw
A statement of intention
Requirements for actionable
- A statement of intention is actionable if it is a term of the contract and it is dishonest [Edgington v Fitzmaurice]
- Kleinwort Benson v Malaysia Mining Corp Berhad = ‘a letter of comfort’ was used
- Smith v Land and House Property Corp = where it is implied that the defendant knew the facts, when they actually don’t, this amounts to misrepresentation
- Vs. Honest opinion is not culpable = Bisset v Wilkinson = sheep estimate, both parties knew the land was never used for sheep farming, so both inexperienced, so in the same position to form an opinion
- Wales v Wadham = wife promises not to remarry during divorce so husband gives her a more generous settlement, when she does, the husband sues, but not binding as they were thoughts said to another party, not to the claimant
Caselaw
A statement of intention
Expertise cases
- ESSO Petroleum v Mardon = facts arose pre-MA 1967 – Esso who were experienced gave an estimate, facts changed, the road layout changed, Esso did not inform the other party, misrepresentation rules apply as they were in a better position due to their experience and it was such an important part of their agreement that it became a term of the contract
- Salt v Stratstone Specialists = CoA allowed the rescission of a contract for a ‘brand new’ car, that was not actually new, although the car had depleted in value once this was discovered and a claim made, s.2 (2) MA 1967 allows for a huge amount of discretion, so the court held that the delay in bringing the case was the fault of the car specialists who used delay tactics through litigation, and the depletion in value of the car was deducted from the damages
- Howard Marine = not liable if the representor can show that they honestly believed on reasonable grounds that their statement was true when they made it – this case concerned the capacity of barges, sued for negligence as there were two documents with the information on, but only one was correct and this one was not checked as it was in German, which the court held was not a reasonable defence under s.1 (2) MA 1967
- Dick Bentley v Harold Smith = this case concerns specific knowledge, so the misrepresentation is a term of the contract, which here concerned the car’s mileage, as the party making the statement can be expected to check the accuracy of it
Caselaw
A statement of intention
Correction and dishonesty
- With v O’Flanagan = if the facts change, they must be corrected, otherwise you have not performed your duty, so are liable + Esso
- Redgrave v Hurd = seller in the sale of a business said their turnover was a certain amount, when asked if correct, they responded that the other party could check for themselves, they didn’t, the court held that the seller cannot be blamed for the buyer trusting them
- Edgington v Fitzmaurice = a statement is actionable if the representor was dishonest = Bowen LJ: the state of a man’s mind is as much a fact as the state of his digestion.
Caselaw
A statement of intention
honest belief
- Howard Marine
- Derry v Peek = if the company honestly believed that it had a right, which it actually did not, shares bought based on these claims, HoL held that the directors were not liable for merely acting unreasonably in failing to check if the claims in the prospectus were true = could not prove fraud, as pre-MA 1967, and fraud is harder to prove
Caselaw
A statement of intention
Exceptions
- Keates v Cardogan = silence does not constitute as misrepresentation, there is no requirement to make a statement if asked a question by a purchaser – there is no general duty of disclosure
- if honestly belief [Howard Marine]
Caselaw
A statement of intention
FRAUD
- fraudulent misrepresentation, so deceit, is proved by showing that the representor made the false statement knowingly, without belief in its truth, or recklessly, unreasonably is not enough
- Royscott v Rogerson = ‘fiction of fraud’ [covered by section 2(1) MA 1967] – the representor is liable for damages as if they were fraudulent even though they were not, in this case, the purchaser and not the dealership induced the financier through the financier through misrepresentation
Caselaw
A statement of intention
False claims
William Sindall v Cambridgeshire CC =
- financial crash meant that the price of property fell, the buyer tried to get out of the contract by saying that there was misrepresentation as the drain on their plans was not where the councils said it would be
- however, the court held that there was no misrepresentation, and Hoffmann LJ noted that rescission could have been barred under s.2(2) anyway, as it gives judges wide discretion to allow the contract to stand and impose damages instead as the cost for the defendant to move the drain would be too high, as the issue was relatively minor in the context of the sale
- so, the misrepresentation must be a significant term in the contract to induce it and judges have wide discretion under s.2(2)
Affirmations
- When the other party says that ‘it’s alright’, or ‘don’t worry about it’, so they affirm the contract
- Affirmation can be express or implied from conduct = United Shoe Machinery Co of Canada v Brunet
