Contract Law :Misrepresentation

Question 1

What is misrepresentation?

Answer 1

-An untrue statement of fact, made by one contracting party to the other, which induces them to enter the contract.

Question 2

What are the 3 categories of pre contract statements?

Answer 2

• Sales Puff (A vague, exaggerated statement meant to advertise or sell), legal affect = no legal affect
• contract term ( a statement that becomes part of the contract terms this laptop is 14g if it’s not that is a misrepresentation), legal affect = entitled to damages or terminate the contract)
• representation (A statement made to persuade someone to enter a contract, but it doesn’t become part of the contract, example this car has never been in a accident), legal affect = remedy reccision or damages

Question 3

When is recession an available remedy?

Answer 3

-Rescission is only available where the false statement was a representation, not a contract term.
Once the false statement is incorporated as a term, the contract is validly formed, and rescission — which treats the contract as never formed — is no longer appropriate instead damages is the better option

Question 4

When is a statement considered a term?

Answer 4

• A statement is a term if the parties intended it to be contractually binding; otherwise, it’s a representation.

Question 5

Is there a duty to disclose facts?

Answer 5

• No general duty to disclose facts – silence is not misrepresentation

Note exceptions apply

Question 6

When is silence misrepresentation?

Answer 6

• if there is a fiduciary duty I.e solicitor
• the contract is one of upmost good faith ie insurance
• it’s a half truth to create a false impression
• a true statement that becomes false

Question 7

What is negligent misrepresentation?

Answer 7

-when a statement is made recklessly that the party relies on to enter into the contract to their detriment

Question 8

What damages are available for negligent misrepresentation?

Answer 8

• the ,mislead party can claim damages, all foreseeable losses are recoverable with the aim being to put the affected party in the position they would have been in had the misrepresentation not occurred

Note if the the negligent party had reasonable grounds to believe it was true at the time then no damages can be claimed but the burden lies in the negligent party to provide they had reasonable grounds

Question 9

What is innocent misrepresentation?

Answer 9

• This is when someone makes a false statement, but they had reasonable grounds to believe it was true at the time.

Question 11

What remedies are available for innocent misrepresentation?

Answer 11

• damages are available ( the innocent party may be able to rescind the contract is recession is possible)

Question 12

What is recession?

Answer 12

• A equitable remedy that cancels a contract and aims to restore both parties to their pre-contract positions, as if the contract never existed.

Question 13

What are the four bars to reccision?

Answer 13

• Affirmation/ You accepted the contract after knowing the truth
  -Lapse of time/ You waited too long to rescind
  -Impossibility of restitution/ You can’t return the goods or benefits in their original form
  -Third-party rights/ A third party has acquired the goods/property in good faith