Misrepresentation Flashcards

Question

Parabola Investments Ltd v Browallia Cal Ltd [2010] EWCA Civ 486 (Opportunity cost)

Answer 1

Facts- a broker made fraudulent mis-rep to a securities trader who then brought an action and sought to recover both the losses occurring directly from the fraud and also the loss of profits when they could have been investing their money in other opportunities. Alternative investments. Legal issues- The court said they could recover for the loses resulted from alternative investments. All that had to be shown was that an alternative option was available and that it would have been profitable.

Answer 2

Facts- the plaintiff purchased an ironmonger’s business from X relying on representations he had made about the weekly wage bill and that trade was conducted from the shop. In fact, both were false and he knew this. The plaintiff sued for damages for fraudulent misrepresentations. Legal issues- the normal rules of remoteness and foreseeability will not count as this was fraud and there was an intention to deceive. So, they don’t have the benefit of limiting the damages.

Answer 3

Facts- Smiths brought shares in a public company FIS at an inflated share price in reliance of on false misrepresentations made by R who acted as broker for SVAM and who was also an employee of the second defendant C. A fraud involving FIS caused the value of the shares to slump and SNC sold the shares at a substantial loss. Legal issues- reparation for all the damage directly flowing from the transaction even though they may not have been foreseeable it must have been directly caused by the transaction.

Answer 4

Tort of negligent misrepresentation Facts- a firm of advertising agents and they asked their bank to investigate the solvency of a company the defendants are easy powers bank they stated that they were good for ordinary business and engagements. They provide a good reference but they included an exclusion clause saying that they give it without responsibility. In reliance on this they book with them and they lost money when they went into liquidation. There is no contractual relationship so the action will have to be based on tort. Legal issues- can there be a duty of care owed to the defendants and the court said yes it could be established as a special relationship but on the facts of the case the exclusion clause stood. Must have a special relationship and they must have professed some special skill; it must have been reasonable that they would rely on it and that they did in fact rely on it. It requires not only proof of a lack of reasonable grounds for the representor’s belief in the truth of what he asserted but also that he owed the representee a duty of care. When damages are awarded in tort for negligent misstatement it will be on the tort basis of returning the injured party to the position as if the tort had not occurred (reliance loss). Liability in negligence is limited to harm that was foreseeable. In an action for negligence, it is for the representee to prove that the representor was negligent.

Answer 5

``` Section 2(1) states: Where a person has entered into a contract after a misrepresentation has been made to him by another party thereto and as a result thereof he has suffered loss, then , if the person making the misrepresentation would be liable to damages in respect thereof had the misrepresentation been made fraudulently, that person shall be so liable notwithstanding that the misrepresentation was not made fraudulently, unless he proves that he had reasonable grounds to believe and did believe up to the time the contract was made that the facts represented were true. This deals with the situation where X states a false fact and Y enters into a contract with X in reliance upon it, but X cannot establish that he or she had reasonable grounds for believing the fact to be true. ``` ``` Advantages/Disadvantages of the action under s 2(1) Section 2(1) reverses the burden of proof from that which applies under the tort of negligence. Section 2(1) does not require a duty of care to have existed between the parties. ```

Answer 6

Facts- Ogden wanted to hire some barges and was told the carrying capacity was 1600 tones based on the managers memory of the Lloyds register but this was incorrect and he could have easily found the correct number by looking at the document. They entered into a contract and fell behind schedule and found that the capacity was only 1000 tones so refused the pay the hire charge. Legal issues- this was successful under section 2(1) of mis-rep act because Howard marine could not discharge the burden to show they had reasonable grounds to believe the figure they had given. He could have just checked the document.

Answer 7

Facts- Naughton brought a pedigree horse for a high price. He trained the horse and it ran in races but never won and the value fell significantly. He discovered that the pedigree of the horse would not have been worth the same. He decided to claim in mis-rep under section 2(1) act claiming all losses flowing from the mis-rep which would be more than under breach of contract. Legal issues- he was awarded all the damages that flowed directly from the mis-rep.

Answer 8

Facts- D a car dealer agreed to sell a car on hire purchase to a customer C for 7600 GBP of which 1200GBP was paid as a deposit. D, in the proposal to the finance company P mis stated these figures as 8000GBP and 1600 deposit. Relying on this P purchased the car from the dealer for 6400 GBP and entered into a hire purchase agreement with C. C dishonestly sold the car and paid no further instalments. P sued, D appealed and P cross appealed. Legal issues- looked at what parliament intended under the act and they concluded that damages under the act must be calculated in the same way as fraudulent mis-rep even when it was not actually present.

Answer 9

Since Hedley, Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 and the Misrepresentation Act 1967, the category of innocent misrepresentation has ceased to encompass every non-fraudulent misrepresentation. An innocent misrepresentation is now only one not covered by any of the above categories. Damages are not available as of right, but the court has the discretion to award them in lieu of rescission under s 2(2) of the Misrepresentation Act 1967.

Answer 10

Facts- sold his car to a fraudster who paid a deposit of £10 and a cheque for the remainder which bounced. Mr Caldwell telephoned the police and AA and the fraudster sold the car on to Car universal finance. Had he validly rescinded the contract before it was brought by the finance company? Legal issues- court held that he had by his actions of contacting the police and the AA. He had taken all steps possible to demonstrate that he wished to rescind and his claim would not be frustrated just because he could not contact the fraudster.

Answer 11

Legal issues- the fact that complete restoration of the pre contractual position is not possible will not always be a bar for rescission. Substantial restoration and a small payment may be sufficient.

Answer 12

Legal issues- court less ready to rescind when the defendant is innocent. ‘The court will be less ready to pull a transaction to pieces where the defendant is innocent, whereas in the case of fraud the court will exercise its jurisdiction to the full in order, if possible, to prevent the defendant from enjoying the benefits of his fraud at the expense of the innocent plaintiff.’

Answer 13

Facts- the condition of a van was misrepresented as being in good condition and when the buyer brought it, it broke down so she contacted them and they agreed to pay half the cost of the repair but it then broke down again at which point he sought to rescind the contract. Legal issues- the court said that the buyer could have rescinded after the first time but he affirmed the contract when they took the van back and allowed them to pay half the costs of repair. This is affirmation by conduct. This was inconsistent with an intention to rescind.

Answer 14

For fraud it starts from when the fraud is discovered or when you should reasonably have discovered it in other forms the time starts ticking from when the contract is completed Facts- gallery innocently told Leaf a painting was buy a famous artist so brought the painting. When he went to sell it 5 years later it was discovered that it was actually only a copy. Could Leaf rescind the contract? Legal issues- the time started ticking when the contract was made as there was no question of fraud so the court found 5 years to be an unreasonable amount of time and therefore was barred from rescission.

Answer 15

Where a person has entered into a contract after a misrepresentation has been made to him otherwise than fraudulently, and he would be entitled, by reason of the misrepresentation, to rescind the contract, then if it is claimed in any proceedings arising out of the contract, that the contract ought to be or has been rescinded, the court or arbitrator may declare the contract subsisting and award damages in lieu of rescission, if of the opinion that it would be equitable to do so having regard to the nature of the misrepresentation and the loss that would be caused by it if the contract were upheld, as well as to the loss that rescission would cause to the other party.

Answer 16

Facts- O let his vessel to C for a period of 33-39 months. The charter provided that it was only to be employed within institute warranty trading limits although C had the privilege to break these against paying any extra insurance incurred. H ordered the vessel outside of the IWL and O refused. When he found out what the intention had been of O and C, he claimed to rescind the contract. C claimed it that rescission was invalid. Legal issues- if one of the common law bars to rescission applies you cannot rely on section 2(2) to claim damages instead,

Answer 17

Facts- D a conglomerate negotiated the sale of a carpet company to P. D negligently misrepresented that there was a special one-off expense of 120,000GBP. The sale of contract included a clause stating that P had not been induced to enter into the agreement by any representation and had a contractual limitation clause that said D was not liable for a breach of the agreement unless written notice was given. P sued for negligent misrepresentation and D sought to rely on those two contractual provisions. Legal issues- they said you can claim for damages under section 2(2) despite the fact you were barred from rescinding.

Answer 18

Facts- the appellant company appealed against a decision that the respondent was entitled to rescind a contract to buy a car and recover the purchase price and an order that it pay the respondents costs on the indemnity basis. Legal issues- they court reasserted the position from the Atlantic Lines case they said that the whole point of the act was to give the courts the power to award damages as an alternative so rescission must be available in the first place.

Misrepresentation Flashcards

(42 cards)