Misrepresentation Flashcards
Definition of an ‘actionable misrepresentation’.
An Actionable Misrepresentation is a statement or material fact made prior to the contract by one party to the other which is false or misleading and which induced the other party to enter into the contract.
Another word for (misrepresentation, mistake and illegality) and their effects in brief.
Vitiating factors - the sort of things that had they been known by both parties at the time of the contract being formed, the parties might have never reached an agreement and thus the contract might never have been formed in the first place.
The effect is that they will invalidate otherwise valid contracts.
3 examples of statements that might not constitute a statement of material fact.
Opinion. Mere sales talk. Statements of future intentions.
Remember:
A false statement of opinion is not a misrepresentation of facts.
Bisett v Wilkinson, 1927. Brief facts and principle.
In Bisett v Wilkinson, the statement made by the defendant in stating they he believe his farm was suitable for 2,000 sheep which induced the plaintiff into buying the land, was held to be a mere statement of opinion since it was not justified to be relied on when both parties knew that the defendant had in fact not carried out any sheep farming on the land before.
The exception to an opinion which may constitute an implied representation of fact.
When the party making the statement had some special knowledge or skill which gives weight to their opinion, then their opinion may be treated as being an implied representation of fact and therefore capable of being a misrepresentation. (Smith v Land and House Property Corporation)
‘Sales talk’ does not constitute a statement of fact. Authority.
Dimmock v Hallett.
The courts held that the statement ‘fertile and improvable’ which were made during a negotiation for the sale of a land were insufficient in substance to be classes as a representation.
A statement of future intent is not capable of amounting to a misrepresentation. Rationale.
Because since a misrepresentation is a false representation of material fact, it follows that since a statement which expresses a future intention is speculation rather than fact, it cannot amount to a misrepresentation.
Exception when a statement of future intent will be considered as a misrepresentation.
In the same way that an opinion can be treated as a fact when the party making it has special knowledge, if the statement of future intention falsely represents the actual intention, in other words, a willful lie), then it may also be treated as a misrepresentation of fact. (As in the case of Edgington v Fitzmaurice)
Edgington v Fitzmaurice. Facts and principle.
In Edgington, the claimant was a shareholder who received a circular issued by the directors of a company requesting loans in order to grow the company. The money, however, was in fact intended to be used to pay off the company’s debt rather than to grow the business. The claimant, who had taken debentures, sought to reclaim his payment on grounds that it had been obtained from him by misrepresentation.
The court held that the untrue statement as to future intention was in fact a misrepresentation of facts and ordered damages to be awarded to the claimant.
False statement of the law. General rule and case demonstrating the change.
Traditionally, a false statement of the law cannot amount to a misrepresentation because there is a presumption that everyone knows the law and therefore it cannot be falsely stated.
However it may be that statements of law are now actionable following the HOL case of Kleinwort Benson v Lincoln City Council (a restitution case not so directly on point, but the implications are clear), which was later followed and adopted in Pankhania v Hackney LBC.
Law on misrep by silence. General Rule and his 4 exceptions.
Generally silence cannot amount to a misrepresentation. There is no duty of disclosure on one party to another.(Fletcher v Krell)
However there are exceptions:
- contracts of outmost good faith e.g insurance
- change in circumstances (With v O’Flanagan)
- half truths (Dimmock v Hallett)
- fiduciary relationship (I.e. doctor-patient, solicitor-client)
Misrep by conduct. Leading case and facts.
Spice Girls v Aprilia World Service.
Aprilia contacted Spice Girls to sponsor them on a court tour. The contract was based on the representation that all 5 members would continue working together. ‘Ginger Spice’ left shortly after the contract and the courts held that there had in fact, been misrepresentation by conduct which had induced Aprilia into entering the contract.
3 requirements for misrepresentation.
1) Must be made prior to the contract. Statement made after formation of ctt is not actionable. (Roscola v Thomas)
2) It must be a statement of fact. (As opposed to the 4 categories)
3) There must be a material inducement (if not it will be like Horsefall v Thomas, misrep but no inducement)
3 rules of inducement and 3 exceptions.
3 rules:
- Representation need not be the sole inducement
- Immaterial if the reliance on the statement is unreasonable so long as it induced the misrepresentee. (Museprime Properties v Adhill)
- Fact that representee did not check is immaterial. Not a bar to an action of misrep. (Redgrave v Hurd. Held: The claimant (who is also a solicitor) is entitled to rescission although he did not examine the documents that were available to him and which would have indicated to him the true state of affairs)
3 exceptions:
- Representee ignorant of the misrep at the time the contract was made
- The misrepresentee or his agent actually knew the truth
- Did not allow MR to affect his judgement (Attwood v Small)
Definition of rescission.
To restore the parties as far as possible to the position they were in before they entered into the contract. An equitable remedy.
The 5 bars of rescission. Go.
1) Affirmation (Long v Lylod)
2) Lapse of time (Leaf v International Galleries)
3) Rights of 3rd parties. (Lewis v Averay)
4) impossible to restore parties to original position.
5) Damages in lieu of rescission is better than rescission.
Definie ‘statement of fact’.
A statement which is capable of being objectively proven to be true/untrue at the time it was made.
Fraudulent Misrepresentation.
Case and burden of proof under tort of deceit.
Derry v Peek.
Lord Herschell said that it is for the misled party to prove that the misrepresentation was made fraudulently, that is, knowingly, without belief in its truth, or recklessly as to whether it be true or false.
The burden of proof is a heavy one.
Negligent Misrepresentation.
2 authority. And requirements.
Hedley Byrne v Heller & Partners.
Confirmed by Esso Petroleum v Marden
The HOL said that the misrepresentee must prove:
1) that the misrepresenter owed him a duty of care to take reasonable care in making the representation, that is, there must be a ‘special relationship’ and
2) that the statement had been made negligently
State the difference between claiming under common law and statute.
Common Statute
Burden of proof in claimant Defendant
No contract required Ctt required
Special relationship required Not required
The reason why people are more inclined to claim damages under statute than common law when there is a contract.
Because it is a more beneficial remedy for the misrepresentee as he only need to prove that the statement is untrue.
It is for the misrepresentor to prove that he had good grounds for making the statement, and the burden of proof is a heavy one, as seen in Howard Marine Dredging v Ogden & Sons.
State the nature in which damages are assessed under tort of deceit and tort of negligence.
Both are assessed on the tortious basis of reliance, that is, the claimant is entitled to be put in the position he was committed. That is, damages would be awarded to cover all losses which flow directly from the untrue statement, or in other words, ‘out of pocket’ financial loss as well as a possible element for ‘opportunity cost’ (East v Maurer), whether or not those losses were foreseeable (Doyle v Olby).
The 3 methods to rescind a contract.
1) By informing the other party
2) where a fraudulent party cannot be traced, by informing the police (Car and Universal Finance v Caldwell)
3) bringing legal proceedings.
When rescission is concerned, the courts will consider one factor.
State the factor and the case it was held.
In Cheese v Thomas, it was held that the courts must look at all the circumstances to do what is ‘fair and just’.
