Misrepresentation

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Misrepresentation

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Misrepresentation (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.
5 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?
Term or representation? - Term = breach of contract - compensate for expectation losses - Misrepresentation = voidable contract at the discretion of the misrepresentee - compensate for reliance losses
False 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)
Statement of fact? NOT facts: - Beliefs and opinions - Statements of future conduct or intention - Abstract statement of law
Beliefs 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)
Statement 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)
Abstract 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)
Material 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
Type of misrepresentation? - Fraudulent - Negligent - Innocent
Fraudulent 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)
Negligent 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
Negligent 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
Negligent 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)
Innocent 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
Bars 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
Contributory 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)
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