Misrepresentation

Question 1

What is a misrep

Answer 1

A false statement made by a party in the contract that induces the other party to enter the contract.

Question 2

What are the 4 elements of a misrep?

Answer 2

1. There must be a false or misleading statement
2. Statement must be fact
3. Made by a party to the contract
4. The statement must induce the other party into making the contract

Question 3

What does Spice Girls v Aprilia show?

Answer 3

Words and conduct (e.g. appearing in the promotional material) can count as statements.

Question 4

What does Fletcher v Krell show?

Answer 4

Silence is not a false statement.

Question 5

What are the exceptions to the rule from Fletcher v Krell?

Answer 5

1. Where the contract is one involving ‘utmost good faith’. This is where two parties have such a good relationship that non-disclosure will be a misrep, as in Lambert v Co-op Insurance.
2. Making a half-true statement. Dimmock v Hallett - the past truth (not telling the buyer full information) was a misrep.
3. Circumstances changing after a statement was made. - With v O’Flanaghan - The representor must explain the change.
4. Consumer rights - When a business hides information that would help consumers make an informed choice.

Question 6

What are not statements of fact?

Answer 6

• Statements of opinion
• Statements of future intention or conduct
• ‘Puff’ or mere sales talk

Question 7

Discuss statements of opinion

Answer 7

Statements of opinion are not treated as fact (Bisset v Wilkinson) unless the opinion is given by a person with special knowledge or skill (Smith v Land and House Property Co).

Question 8

Discuss statements of future intentions

Answer 8

Not a fact unless the party knew that intention was false when making it (Edgington v Fitzmaurice).

Question 9

Discuss puff

Answer 9

Considered as empty boasts rather than fact. It should be considered whether the statement would make a reasonable person enter a contract.
Dimmock v Hallett - The statement was too vague to make a reasonable man enter the contract
Carlill - A clear statement can be treated as fact.

Question 10

When is a false statement made by a party to the contract?

Answer 10

It must be a party in the contract making the false statement. If a third party makes the statement, there is no misrep.

Question 11

What does it mean for the statement to induce the other party to the contract?

Answer 11

The party must know of the statement and it materially affected their decision to enter the contract.

Question 12

What does Attwood v Small show?

Answer 12

Relying on a third party’s report, not the seller, meant the seller’s statement did not induce them to a contract.

Question 13

What does Redgrave v Hurd show?

Answer 13

It does not matter if the party did not take reasonable steps to verify the statement, as long as they were convinced by it.

Question 14

What are the 3 types of misrep?

Answer 14

1. Innocent
2. Negligent
3. Fraudulent
   (In increasing order of seriousness)

Question 15

What is an innocent misrep?

Answer 15

S2(1) of the Misrepresentation Act 1967 defines an innocent misrep as one that is false, but which the representor believes to be true and has reasonable grounds to believe this, as in Leaf v IG.

Question 16

What is a negligent misrep?

Answer 16

Where the representor believes the statement to be true but does not have reasonable grounds for believing this, as in Howard Marine v Ogden.

Question 17

What is a fraudulent misrep?

Answer 17

Where the representor makes a statement that they do not believe is true, as in Derry v Peak

Question 18

Why is it important to identify what type of misrep there is?

Answer 18

It affects how the remedies work.

Question 19

What are the 2 main remedies for misrep?

Answer 19

1. Rescission

2. Damages

Question 20

What is rescission?

Answer 20

Rescission applies to all types of misrep. This is where the courts put the parties back into the position they were before the contract was made.

Question 21

What are the bars to rescission?

Answer 21

1. It is impossible to revert the parties, as in Clarke v Dickson
2. The contract is affirmed. This is where the mislead party continues with the contract after knowing of the misrep, as in Long v Lloyd.
3. Delay - If C leaves it too long before trying to rescind the contract, the court may not allow them to do so, as in Leaf v IG. The delay starts from when the misrep takes place, unless the misrep is fraudulent, when the delay starts from when the misrep is discovered.
4. A third party gained rights under the contract. A third party may lose out innocently after rescission, as in Lewis v Avery.

Question 22

Discuss Damages

Answer 22

Damages will vary depending on the type of misrep.
For innocent misrep, there is no automatic right to damages but S2(2) says damages can be awarded instead of rescission (one or the other), although rescission must be available.
For negligent misrep, damages are available as a substitute to rescission, set out by Salt v Strastone. If rescission is available, S2(1) shows the value of damages is the same as for fraudulent misreps.
For fraudulent misreps, damages can always be claimed for expenses or loss of profits, as in East v Maurer.
see photo for summary of remedies