Unit 7 Flashcards
(46 cards)
Mere Puff: Definition & Example
Definition: Statements of opinion or general exaggeration, not intended to be taken literally or relied upon as factual assertions.
Example: “This software will revolutionize your business!”, “The most comfortable chair ever.” Courts recognize reasonable people understand hyperbole and do not rely on such statements as facts.
Express Terms: Definition & Significance
Express Terms: These are statements that form part of the contract, either explicitly stated or implied. They create binding obligations, and their breach gives rise to contractual remedies. Legal Significance: Terms define the parties’ rights and obligations. Their interpretation and enforcement are central to contract law.
Representations: Definition & Example
Definition: Factual statements made to induce a party to enter a contract but do not become part of the contract itself.
Example: “This car has only had one previous owner.”
If false (misrepresentation) and induced the contract, it can render the contract voidable, allowing rescission or a claim for damages.
Distinguishing Terms from Representations - Intention & Objective Test
Court determines if parties intended statement as a contractual undertaking. Objective test: What would a reasonable person infer from words and conduct?
Guidelines for distinguishing terms from representations?
Skill & Knowledge: If statement maker has specialized knowledge, the statement is more likely to be a term. Dick Bentley Productions v Harold Smith (Motors): Expert car dealer’s statement about mileage was a term.
Importance of the Statement: If recipient emphasizes the statement’s importance, it suggests a term.
Bannerman v White: Buyer stressed no sulphur in hops; seller’s assurance was a term.
Verification of the Statement: If statement maker encourages verification, it suggests a representation.
Ecay v Godfrey: Seller of boat suggested buyer survey it; statement about soundness was a representation.
Written Contract & Lapse of Time: Verbal statement repeated in written contract is strong evidence of a term. Lapse of Time: Longer time between statement and contract reduces likelihood of it being a term.
Routledge v McKay: Week between bike’s age statement and written contract meant statement was a representation.
Overlap with Other Areas of Law
Sale of Goods/Services Acts (SGA 1979, SGSA 1982, CRA 2015): Provide remedies for misdescriptions of goods.
Tort Law: Negligent or fraudulent misrepresentations can lead to tort claims.
What is a Misrepresentation? - Definition
A false statement of fact. The statement can be oral, written, or by conduct. Spice Girls v Aprilia World Service BV [2000] EMLR 748: Participation in a commercial was held to be a representation by conduct. Generally, silence is not a misrepresentation.
Misrepresentation - Silence (General Rule & Exceptions)
Generally, silence is not a misrepresentation. Hamilton and
Others v Allied Domecq plc [2007] UKHL 3
Exceptions:
- Fiduciary Relationship: Duty of disclosure (e.g., solicitor-client).
- Contracts of Utmost Good Faith: Insurance contracts require full disclosure.
- Half-Truths: Misleading by omitting crucial information (Curtis v Chemical Cleaning).
- Change of Circumstances: True statement becomes false before contract (With v O’Flanagan).
Misrepresentation - Statements of Opinion (General Rule & Exceptions)
Generally not misrepresentations.
Exceptions:
- Opinion not genuinely held.
- No reasonable grounds for the opinion.
- Opinion given by someone with superior knowledge (Smith v Land and House Property).
- Bisset v Wilkinson: Statement about farm’s sheep capacity was opinion as seller had no personal experience.
Misrepresentation - Statements of Intention (General Rule & Exception)
Not misrepresentations unless the intention was never actually held.
Edgington v Fitzmaurice: False statement about loan’s purpose was misrepresentation of fact (state of mind).
Misrepresentation - Parties & Timing
Must be made by one contracting party to another. Statements by third parties may lead to tort claims.
Must occur before the contract was formed.
Misrepresentation - Inducement
The statement does not have to be the only reason why a party enters into a contract
provided it did encourage that party to do so. (Edgington v Fitzmaurice).
Misrepresentation - Reliance on Own Experts & Failure to Verify
Reliance on Experts: No misrepresentation if party relies on their own expert’s advice (Attwood v Small).
Failure to Verify: Failure to take opportunity to verify does not negate misrepresentation (Redgrave v Hurd). However, this principle may not be applied where the true position was set out in the contract signed by
the claimant.
Misrepresentation - True Position in Contract
If the true position is clearly laid out in the contract, it can negate reliance on the misrepresentation (Peekay Intermark v ANZ for experienced businessperson).
Consumer Protection: Courts are more protective of consumers misled by misrepresentations (Curtis v Chemical Cleaning). rather than experienced businessman.
Remedies for Misrepresentation
Remedies depend on whether misrepresentation is fraudulent or non-fraudulent. Rescission (making contract voidable) is a primary remedy for both.
Rescission - Effect & How to Rescind
Effect: Makes contract voidable. Innocent party chooses to rescind or affirm.
How: Notify other party, take steps indicating rescission if other party unavailable (Car and Universal Finance v Caldwell), or apply to court for order.
Rescission - Effect of Rescission
Aims to restore parties to their pre-contractual positions. Return of money or property exchanged. Future obligations discharged.
Bars to Rescission: Bona Fide Purchaser
If a third party acquires rights in the subject matter of the contract in good faith and for value before rescission, the right to rescind is lost (Car & Universal Finance v Caldwell highlights importance of timely action).
Bars to Rescission: Affirmation
Innocent party elects to continue with the contract after becoming aware of the misrepresentation. Can be express or implied by conduct.
Bars to Rescission - Undue Delay
Lapse of an unreasonable amount of time after discovering the misrepresentation can bar rescission.
Leaf v International Galleries: Five-year delay after discovering misrepresentation about a painting barred rescission.
Delay for non-fraudulent misrepresentation calculated from when it should have been discovered.
Delay for fraudulent misrepresentation calculated from when it was discovered.
Bars to Rescission - Impossibility of Restitution
If it is no longer possible to restore the parties precisely to their original pre-contractual positions, rescission may be barred. However, precise restitution is not always required.
Erlanger v New Sombrero Phosphate Co: Substantial restitution was sufficient despite some changes.
Crystal Palace FC v Iain Dowie: Rescission of employment contract denied due to impossibility of restoring original employment relationship.
Indemnity (Misrepresentation Remedy)
Compensation for expenses necessarily incurred as a result of entering the contract induced by the misrepresentation. Available as part of rescission.
Whittington v Seale-Hayne (1900): Indemnity covered expenses directly tied to contractual obligations (rent, rates, repairs) but not consequential losses (illness from contaminated water).
Damages in Lieu of Rescission
Under section 2(2) of the Misrepresentation Act 1967. Available for non-fraudulent misrepresentation. Court has discretion to award damages instead of rescission. Not available if rescission is barred. Used when rescission would be inequitable. Court considers nature of misrepresentation and losses to each party if contract upheld vs. rescinded.
Damages: Fraudulent Misrepresentation - when is it fraud
Claimable under the tort of deceit. Requires proving the false statement was made knowingly, without belief in its truth, or recklessly (Derry v Peek (1889)) careless whether it be true or false.
