Topic 5 - Misrepresentation

Question 1

What is a representation?

Answer 1

A statement asserting the truth of a given state of facts.

Question 2

Who is the representor?

Answer 2

The party who allegedly made the representation.

Question 3

Who is the representee?

Answer 3

The party who allegedly received the representation.

Question 4

Define actionable misrepresentation.

Answer 4

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

Question 5

What is the effect of a misrepresentation on a contract?

Answer 5

It makes the contract voidable but not void.

Question 6

What does ‘unambiguous’ mean in the context of misrepresentation?

Answer 6

The representation must be clear and have the meaning put forward by the representee.

Question 7

True or False: A statement is not false if it is substantially correct.

Answer 7

True.

Question 8

What is required for a representation to be actionable?

Answer 8

It must be a statement of fact, not an undertaking to do or not do something.

Question 9

What distinguishes mere ‘puff’ from a representation?

Answer 9

Mere advertising puff does not qualify as a representation.

Question 10

Can conduct be treated as a statement of fact?

Answer 10

Yes, conduct may be treated as a statement of fact.

Question 11

What was the traditional rule regarding statements of law?

Answer 11

A statement of law could not give rise to an actionable misrepresentation.

Question 12

True or False: Statements of opinion can form the basis of a misrepresentation.

Answer 12

False.

Question 13

What is required for a statement to be considered a statement of fact?

Answer 13

It must assert the truth of a fact that exists or did exist.

Question 14

What must the misrepresentation be addressed to?

Answer 14

The misrepresentation must be addressed by the representor to the claimant.

Question 15

What does it mean for a representation to induce the claimant to enter into a contract?

Answer 15

The representation must have caused the representee to enter into the contract.

Question 16

What is the test for materiality in misrepresentation?

Answer 16

Did the statement relate to an issue that would have influenced a reasonable person?

Question 17

What are the two possible outcomes when determining if a statement is material?

Answer 17

• If material, inducement is inferred
• If not material, claimant must prove subjective inducement

Question 18

What is the significance of a statement not being communicated to the representee?

Answer 18

It means there can be no actionable misrepresentation.

Question 19

What happens if the representee knows the statement is untrue?

Answer 19

There is no actionable misrepresentation.

Question 20

Fill in the blank: A representation is not actionable if the representee’s decision was not affected by the _______.

Answer 20

[misrepresentation]

Question 21

What does the case Edgington v Fitzmaurice illustrate about inducement?

Answer 21

The misrepresentation need not be the only reason the claimant entered the contract.

Question 22

True or False: A party can bring a claim in misrepresentation if they relied on their own investigations.

Answer 22

False.

Question 23

What is contributory negligence in the context of misrepresentation?

Answer 23

It may arise if a representee fails to investigate when it was reasonable to do so.

Question 24

What are the components that can be included as statements of fact?

Answer 24

• Statements of fact
• Some conduct
• Statements of law

Question 25

What is an example of a statement of opinion that can be actionable?

Answer 25

A statement of opinion lacking reasonable grounds from someone with superior knowledge.

Question 26

Fill in the blank: A representation that something will be done in the future cannot be true or false at the moment it is made; it is a _______.

Answer 26

[contract or promise]

Question 27

What is the significance of the case Wales v Wadham regarding future intentions?

Answer 27

The wife had no duty to disclose her change of intention to remarry.

Question 28

What was the wife's initial intention regarding remarriage after the divorce settlement?

Answer 28

She had a conscientious objection to remarriage.

Question 29

What change occurred after the divorce settlement was negotiated?

Answer 29

The wife agreed to marry another person.

Question 30

On what grounds did the husband seek to rescind the divorce settlement?

Answer 30

Non-disclosure of the wife's intention to remarry.

Question 31

What was the court's ruling regarding the husband's claim to rescind the settlement?

Answer 31

The court upheld the settlement and dismissed the husband's claim.

Question 32

What is a limited statement of fact in the context of intentions?

Answer 32

It is a statement that the representor has a specific intention at that time.

Question 33

Which case established that misrepresenting an existing intention is actionable?

Answer 33

Edgington v Fitzmaurice (1885) 29 Ch D 459.

Question 34

In Edgington v Fitzmaurice, what was the nature of the misrepresentation?

Answer 34

The company misrepresented the intended use of funds from debenture sales.

Question 35

True or False: Silence can be considered a statement of fact in misrepresentation cases.

Answer 35

False.

Question 36

What is the general rule regarding silence in a contract?

Answer 36

There is no duty to disclose facts that might affect the other party's decision.

Question 37

What case illustrates the general rule of silence in misrepresentation?

Answer 37

Keates v The Earl of Cadogan (1851) 10 CB 591.

Question 38

List the three recognized exceptions to the general rule of silence.

Answer 38

* Half-truths * Continuing representations * Contracts uberrimae fidei

Question 39

What constitutes a half-truth in misrepresentation?

Answer 39

A statement that is technically true but misleading.

Question 40

Give an example of a case involving a half-truth.

Answer 40

Dimmock v Hallett (1866) LR 2 Ch App 21.

Question 41

What is the principle of continuing representations?

Answer 41

A representor must correct a statement that has become false before the contract is entered.

Question 42

In which case was the principle of continuing representations established?

Answer 42

With v O'Flanagan [1936] Ch 575.

Question 43

What are contracts uberrimae fidei?

Answer 43

Contracts in which one party must disclose all material facts due to their strong position of knowledge.

Question 44

What is a key characteristic of a contract of insurance?

Answer 44

It is a contract uberrimae fidei.

Question 45

What are the three categories of misrepresentation established by the Misrepresentation Act 1967?

Answer 45

* Fraudulent * Negligent * Innocent

Question 46

What is the classic definition of fraudulent misrepresentation?

Answer 46

A false representation made knowingly, without belief in its truth, or recklessly.

Question 47

What case provided the classic definition of fraudulent misrepresentation?

Answer 47

Derry v Peek (1889) 14 App Cas 337.

Question 48

What must a claimant prove to establish fraudulent misrepresentation?

Answer 48

Proof of fraud, which includes knowing falsehood or recklessness.

Question 49

What is the burden of proof in cases of fraudulent misrepresentation?

Answer 49

It is a difficult burden for the claimant to discharge.

Question 50

What does Section 2(1) of the Misrepresentation Act 1967 state?

Answer 50

A person is liable for negligent misrepresentation unless they prove reasonable grounds for believing it was true.

Question 51

What happens when a representor is found liable for negligent misrepresentation?

Answer 51

They are treated as if they made a fraudulent misrepresentation.

Question 52

What remedy is available when misrepresentation is established?

Answer 52

Rescission, damages, and indemnity.

Question 53

What is the effect of misrepresentation on a contract?

Answer 53

It renders the contract voidable but not void.

Question 54

What are the bars to rescission?

Answer 54

* Affirmation * Lapse of time * Restitution is impossible * Third party rights accrue

Question 55

What does 'affirmation' mean in the context of rescission?

Answer 55

The representee declares intention to proceed with the contract.

Question 56

In what case was rescission deemed impossible due to changed circumstances?

Answer 56

Clarke v Dickson (1858) EB & E 148.

Question 57

What is the nature of rescission in the context of misrepresentation?

Answer 57

Rescission is an equitable remedy and will not be awarded in cases where the contract has been affirmed, excessive time has elapsed, restitution is impossible or third party rights accrue which make restitution impossible. ## Footnote Rescission aims to restore parties to their original positions prior to the contract.

Question 58

What is the effect of a misrepresentation on a contract?

Answer 58

The effect of a misrepresentation is to make the contract voidable, not immediately void. ## Footnote This means the contract remains valid until notice is given of the intention to rescind.

Question 59

How does third party rights relate to misrepresentation?

Answer 59

A person acquiring goods under a misrepresented contract can pass good title to those goods to an innocent third party who purchases without notice of the misrepresentation. ## Footnote This prevents restitution.

Question 60

What is indemnity in the context of rescission?

Answer 60

An indemnity may be awarded to cover expenses for obligations assumed as a direct result of the contract. ## Footnote For example, obligations created by the purchase of a leasehold property due to misrepresentation.

Question 61

What are the general conditions under which damages are awarded for misrepresentation?

Answer 61

Damages for misrepresentation are potentially greatest for fraudulent misrepresentation, while negligent misrepresentation can match those for fraudulent. ## Footnote Innocent misrepresentation does not afford any damages per se.

Question 62

What is the measure of damages for fraudulent misrepresentation?

Answer 62

The measure of damages is that necessary to place the innocent injured party in the position they would have been in had the misrepresentation not been made. ## Footnote The claimant must mitigate damages upon discovering the fraud.

Question 63

What does Section 2(1) of the Misrepresentation Act 1967 state?

Answer 63

If a person has suffered loss due to a misrepresentation made by another party, that person is liable for damages as if the misrepresentation was made fraudulently unless they prove reasonable grounds to believe it was true. ## Footnote This effectively holds the representor to a high standard of care.

Question 64

What is the difference between damages under Section 2(1) and Section 2(2) of the MA 1967?

Answer 64

Section 2(1) damages are for loss directly flowing from the misrepresentation, while Section 2(2) damages are awarded in lieu of rescission at the court's discretion. ## Footnote Section 2(2) is only available for negligent and innocent misrepresentation.

Question 65

What are the categories of misrepresentation according to their legal basis?

Answer 65

Categories: * Fraudulent: Tort of deceit * Negligent: s 2(1) MA 1967 * Innocent: s 2(1) MA 1967 ## Footnote Each category has different implications for rescission and damages.

Question 66

What is the effect of exemption clauses in contracts related to misrepresentation?

Answer 66

Exemption clauses that purport to exclude liability for misrepresentation are ineffective unless they satisfy the requirement of reasonableness under s 3 MA 1967. ## Footnote The burden of proof lies on those claiming the term satisfies reasonableness.

Question 67

What is a non-reliance clause?

Answer 67

A non-reliance clause attempts to exclude liability for misrepresentations by stating that neither party has relied on any representation from the other. ## Footnote Such clauses are subject to reasonableness and cannot exclude liability for fraudulent misrepresentation.

Question 68

How can representations affect the terms of a contract?

Answer 68

A representation may become a term of the contract if the court decides it is incorporated into the contract. ## Footnote If deemed a term and false, it can give rise to both breach of contract and misrepresentation claims.

Question 69

What is the distinction between misrepresentation and negligent misstatement?

Answer 69

Misrepresentation pertains to false statements inducing a contract, while negligent misstatement relates to the duty of care owed in making accurate statements. ## Footnote Claims in negligent misstatement are generally harder to establish.