Misrepresentation Quiz

The elements of a claim in misrepresentation are: 1. [blank_start]Untrue statement of fact[blank_end] 2. [blank_start]Party to the contract[blank_end] 3. [blank_start]Inducement[blank_end] 4. [blank_start]Defences[blank_end] 5. [blank_start]Remedies[blank_end]

A. Untrue statement of fact: o Test of [blank_start]falsity[blank_end] = whether the statement is “[blank_start]substantially correct[blank_end]”? – [blank_start]Avon Insurance plc. v Swire Fraser Ltd[blank_end] (2000) per Rix J The notion of “[blank_start]statement[blank_end]” can extend to [blank_start]mere conduct without words[blank_end] – [blank_start]Spice Girls v Aprilia[blank_end] World Service (2002) o The following are NOT [blank_start]untrue statements of fact[blank_end]: o A mere “[blank_start]puff[blank_end]” or “[blank_start]sales patter[blank_end]” – [blank_start]Dimmock v Hallett[blank_end] (1866) o Statements of intention, unless at the time of stating the [blank_start]intention[blank_end] the party did not actually have such an intention – [blank_start]Edgington v Fitzmaurice[blank_end] (1885) o Statements of [blank_start]opinion[blank_end], unless the maker of the statement did not actually hold the opinion or had no [blank_start]reasonable grounds[blank_end] on which to base the opinion – [blank_start]Bisset v Wilkinson[blank_end] (1927) o Statements of law in the [blank_start]abstract[blank_end], unless made dishonestly or without reasonable basis. But a statement about the [blank_start]effect of the law[blank_end] in a particular situation can be actionable as misrepresentation – [blank_start]Pankhania[blank_end] v London Borough of Hackney (2002) o There is no duty to disclose [blank_start]facts[blank_end] which if known would have affected the other party’s decision to enter into the contract – [blank_start]Turner v Green[blank_end] (1895) o However, [blank_start]silence[blank_end] amounts to misrepresentation in four situations: (i) [blank_start]Half-truths[blank_end]: if a party makes a statement which is in fact true, they may still be guilty of misrepresentation by what is left unsaid – [blank_start]Dimmock v Hallett[blank_end] (1866) (ii) [blank_start]Change of circumstances[blank_end]: if a statement, which was true at the time, becomes untrue, then the representor has a duty to inform the representee about the change – [blank_start]With[blank_end] v O’Flanagan (1936) (iii) Contracts of [blank_start]good faith[blank_end] – e.g. insurance contracts (iv) Certain confidential or [blank_start]fiduciary relationships[blank_end]

B. [blank_start]Party[blank_end] to the contract: Misrepresentation must be made by a party to the contract, though it can be made by via a party’s [blank_start]agent[blank_end]. There is no [blank_start]remedy[blank_end] in contract law for a misrepresentation made by a non-party; there may be, however, a remedy in [blank_start]tort[blank_end].

C. Inducement: o The [blank_start]misrepresentation[blank_end] must [blank_start]influence[blank_end] a party in deciding whether or not to enter the contract. It need not be the [blank_start]sole[blank_end] inducement – [blank_start]Edgington v Fitzmaurice[blank_end] (1885) o If the misrepresentation is [blank_start]fraudulent[blank_end], there is a [blank_start]rebuttable presumption[blank_end] that it induced the contract – [blank_start]Dadourian[blank_end] Group International v Simms (2009) Thus the misrepresentation is not actionable if the representee: o Never knew of its [blank_start]existence[blank_end] – [blank_start]Horsfall v Thomas[blank_end] (1862) o Did not allow it to affect their [blank_start]judgment[blank_end] – [blank_start]Smith v Chadwick[blank_end] (1884); Attwood v Small (1838) o Verification duty? [blank_start]Redgrave v Hurd[blank_end] (1881)

Types of Misrepresentation: o FRAUDULENT – false statement made (i) [blank_start]knowingly[blank_end], or (ii) without belief in its [blank_start]truth[blank_end], or (iii) [blank_start]recklessly[blank_end] – [blank_start]Derry v Peek[blank_end] (1889) o NEGLIGENT – misrepresentation made [blank_start]carelessly[blank_end] o [blank_start]INNOCENT[blank_end] –representor honestly believes in the truth of the statement and had [blank_start]reasonable grounds[blank_end] for their belief o NEGLIGENT MISSTATEMENT AT COMMON LAW – arises in the context of a “[blank_start]special relationship[blank_end]” between persons. The maker of the statement is under a [blank_start]duty of care[blank_end] at common law to do all that is reasonable to ensure that the statement is correct – [blank_start]Hedley Byrne v Heller[blank_end] (1964). This tort provides a remedy where the statement is made by a [blank_start]third party.[blank_end]

D. Remedies: (I) [blank_start]RESCISSION[blank_end] o [blank_start]Equitable[blank_end] remedy available for all types of misrepresentation. o Innocent party must exercise choice: to [blank_start]rescind[blank_end] or to [blank_start]affirm[blank_end] contract. o Effect of rescission: parties are put back to their [blank_start]pre-contractual[blank_end] position. o Notice: Generally, innocent party must notify [blank_start]representor[blank_end] of decision to rescind. If impossible to find representor, contract can be [blank_start]rescinded[blank_end] by conduct of representee – [blank_start]Car and Universal[blank_end] Finance Co. Ltd. v. Caldwell (1965) [blank_start]Bars[blank_end] to rescission: o When innocent party [blank_start]affirms[blank_end] contract (after discovering true state of affairs) – [blank_start]Long v. Lloyd[blank_end] (1958) o When parties cannot be restored to substantially same pre-contractual position (principle of restitutio in integrum) o When third party has acquired an interest in [blank_start]good faith[blank_end] and for value of subject matter of [blank_start]contract[blank_end] – White v. Garden (1851); cf. Car and Universal Finance Co. Ltd. v. Caldwell (1965) o When substantial time has elapsed. However, in cases of [blank_start]fraud[blank_end] or breach of [blank_start]fiduciary[blank_end] duty, lapse of time before discovery that statement is false is not bar to rescission, but [blank_start]lapse of time[blank_end] after discovery is evidence of affirmation. (II) [blank_start]DAMAGES[blank_end] For fraudulent misrepresentation: o Damages available in tort of [blank_start]deceit[blank_end]. Innocent party can recover all loss (including consequential loss) directly flowing from [blank_start]breach[blank_end] to put them in position they would have been in had representation not been made: Doyle v. Olby (Ironmongers) Ltd. (1969); affirmed in Smith New Court Securities Ltd. v. Scimgeour Vickers (Asset Management) Ltd. (1997). Innocent party also entitled to [blank_start]full compensation[blank_end] for loss suffered after date of contract. o Representee under duty to mitigate loss once they discover fraud: Down v. Chappell (1997). For negligent misrepresentation: o Damages available under s.2(1) of Misrepresentation Act 1967 o Burden of proof (or, more accurately, disproof) is quite onerous – Howard Marine & Dredging Co. Ltd. V. A. Ogden & Sons Ltd. (1978). o Damages assessed as for tort of deceit (“fiction of fraud”) – [blank_start]Royscot Trust[blank_end] Ltd. v. Rogerson (1991); cf. Smith New Court Securities Ltd. V. Scrimgeour Vickers (Asset Management) Ltd. (1997). o Where misrepresentation is made by an agent, the innocent party can only bring action under MA s. 2(1) against contracting party, not party’s agent: Resolute Marine v. Nippon Kaiji Kyokai (1983). o [blank_start]Damages[blank_end] may be reduced if evidence of [blank_start]contributory negligence[blank_end] on part of innocent party – see Gran Gelato v. Richcliff (Group) Ltd. (1992). o Damages may be awarded in [blank_start]lieu[blank_end] of rescission in cases of (non-fraudulent) negligent and [blank_start]non-negligent[blank_end] misrepresentation: see MA s.2(2). o Measure of damages here is at court’s [blank_start]discretion[blank_end]. o Damages in lieu of rescission usually assumed as not available if right to rescind has already been lost – Government of Zanzibar v. British Aerospace (Lancaster House) Ltd. (2000); cf. Thomas Witter v. TBP Industries (1996) per Jacobs J. For innocent misrepresentation: o MA s.2(2) may give monetary relief in cases of wholly innocent misrepresentation, but up to the court to decide. o Note too possibility to get [blank_start]indemnity[blank_end] in connection with action for rescission – Whittington v. Seale-Hayne (1900). o Misrepresentations which become terms – See MA s. 1: right to rescission for misrepresentation not lost when misrepresentation becomes term. Limiting liability for misrepresentation: o Contractual clauses attempting to exclude or limit liability for [blank_start]misrepresentation[blank_end] are construed strictly – Thomas Witter v. TBP Industries Ltd. (1996); Inntrepreneur Pub Co. v. East Crown Ltd. (2000). o Also several statutory controls, the central of which is MA s. 3. o However, some types of [blank_start]clauses[blank_end] (e.g. “no-reliance” clauses) may not be caught by MA s. 3 – Watford Electronics Ltd. v. Sanderson CFL Ltd. (2001).