Flashcards
Misrepresentation
Cards in this deck (17)
- 1Misrepresentation (definition)Only a false statement of fact (not opinion, future intention or abstract law) made by the misrepresentor to the misrepresentee, which induces the second to enter into a contract, can constitute an actionable misrepresentation rendering the contract voidable and give rise to possible remedies for misrepresentation.
- 25 questions to be answered(1) Is the statement a term of the contract or representation?
(2) Is there a false statement of fact?
(3) Does it induce the other party to enter into a contract?
(4) Type of misrepresentation?
(5) What remedies are available? - 3Term or representation?- Term = breach of contract - compensate for expectation losses
- Misrepresentation = voidable contract at the discretion of the misrepresentee - compensate for reliance losses - 4False statement?Statement - may be true
- Conduct - covering patches of dry rot (Gordon v Selico Co. Ltd)
- Omission - GP silence is not misrep, no obligation to disclose (Smith v Hughes - old or new oats it was the buyer's decision), but misrepresentation if:
.... half true (does not paint the whole picture) (Dimmock v Hallett - farms had tenants, but they have given notice to quit)
.... it was true when made, but circumstances changed before contracting - has to be disclosed (Spice Girls Ltd v Aprilia World SErvices BV the group eventually knew that one of them was leaving) - 5Statement of fact?NOT facts:
- Beliefs and opinions
- Statements of future conduct or intention
- Abstract statement of law - 6Beliefs and opinions (Statement of fact?)GP: Beliefs or opinions are not facts as long as both parties do not have a reason to believe so - (Bisset v Wilkinson - both parties knew the land has not been used for sheep farming seller stated opinion on the number of sheep it can sustain);
- the representor is in a stronger position to know the truth (Smith v Land & House Property Corporation - tenants were behind on rent, so could not have been most desirable tenants)
-experts opinion can be viewed as a fact (Esso Petroleum obiter) - 7Statement of future conduct or intention (Statement of fact?)GP: Not facts as the future is unpredictable;
- unless at the time making them the representor has the intention of not fulfilling them (Edgington v Fitzmaurice - stating that raising funds to buy assets, but intending to cover company's debts) - 8Abstract statements of law (Statement of fact?)GP: Abstract statements of what the law is cannot be statements of fact.
- But where there is factual context they can be (Pankhania v Hackney London Borough Council - wrongly described the legal status of a tenant occupying a property for sale, which impacted the new owner's ability to eject them) - 9Material reliance?- Causal link - must induce the reasonable person to contract
- Actual knowledge (Horssfall v Thomas unaware of a defect in a gun prior to purchase)
- Own investigation - not obligatory (Redgrave v Hurd false statement of profits, given opportunity to examine, but not actioned upon - contributory negligence)
..... but if done and relied upon then no misrep (Attwood v Small - relying on their own experts)
- Knowledge of falsehood before entering into contract nullifies misrep - 10Type of misrepresentation?- Fraudulent
- Negligent
- Innocent - 11Fraudulent misrepresentation- Subjective test - misrepresentor must (1) have known the statement was false at the time it was made; (2) or not believing it is true; (3) or not caring whether it is true or false (recklessness)
- Burden of proof is on claimant and not easy (Derry v Peek genuinely believed in the statement they made)
- Remedies - rescission + damages for all losses that flow directly from the fraud whether foreseeable or not (Doyle v Olby) including loss of opportunity had they used the money to purchase another business istead (East v Mauerer) - 12Negligent misrepresentation- An honest belief that the statement is true but the representor has failed in their duty to use reasonable care and skill to check accuracy. Two types:
- Negl. misrep at common law
- Negl. misrep under statute s 2(1) MA 1967 - 13Negligent misrepresentation (Common Law)- Special relationship i.e. expert; proof of duty of care owed; no need for contract between them - agent/third party (Hedley Byrne &Co Ltd v Heller & Partners Ltd);
- No need to prove actionable misrepresentation (can be opinion, etc.)
- Burden of proof on C;
- Remedies - rescission and / or (s 2(2) MA if equitable) damages for reasonably foreseeable losses (no general right for damages) / indemnity - 14Negligent misrepresentation (s 2(1) Misrepresentation Act 1967)- There must be a contract between misrepresentor and misrepresentee;
- Burden of proof on D -reasonable grounds to believe it's true;
- Remedies - Same as fraud: rescission and / or (s 2(2) MA) damages for all losses that flow directly from the misrepresentation whether foreseeable or not including loss of opportunity /indemnity (Royscot Trust Ltd v Maidenhead Honda Centre Ltd) - 15Innocent misrepresentation- An honest belief that the statement is true where that belief is based on reasonable grounds.
- Burden of proof on D
- Remedies - rescission (where available); indemnity OR discretionary damages available in lieu (instead) applying s 2(2) MA 1967 - 16Bars to rescission- Affirmation - find out about it, but continues with the contract (Long v Lloyd)
- Lapse of time - finds out too late (Leaf v International Galleries)
- Restitution impossible - too costly and or difficult to return shares/business
- Third party acquires rights - 17Contributory negligence- GP the claimant does not have to check the facts, but
- The damages awarded may be reduced to take account of the misrepresentee's contributory negligence in contributing to their own loss.
- Does not apply to cases of fraud (Alliance and Leicester), only to negligence including s. 2(1) (Gran Gelato v Richcliffe)