Misrepresentation Flashcards

Question

What are the cases that demonstrate conduct can give rise to misrepresentation?

Answer 1

**Gordon V Sellico (1986)** * Claimants purchased a long lease in a block of flats * Building was already badly maintained at date of purchase * Building eventually found to be badly affected by dry rot, originating from incursion of water * Local authority served a dangerous structure notice and obtained a magistrates' court order * When this was not complied with, defendants instructed builders to paint over the dry rot before sale of the lease! **Held: Fraudulent misrepresentation!** **Spice Girls Ltd v Aprilla World Services BV (2002)** * Spice Girls entered into a contract with Defendant motorcycle manufacturer to sponsor the Spice Girls' tour * Geri Halliwell left the band officially after the contract was signed * Defendant discovered other members of the group were informed of her decision to before contract signed ○ Conduct was keeping this information from AWS **Held:** * Conduct constituted a misrepresentation and AWS allowed to rescind contract * Gave impression Halliwell intended to remain part of the group in the foreseeable future (by keeping the information of her departure to themselves)

Answer 2

It is a statement relating to content/meaning of law contained in * the Acts of Parliament * Statutory instruments * common law

Answer 3

Everyone is presumed to know the law - a misrepresentation could not amount to a vitiating factor. 'ignorance of the law is no excuse'

Answer 4

**Pankhania v LB Hackney** * C had bid for commercial property, part of which was occupied by National Parts Ltd (NCP) and used as a car park * C alleged that he had been induced to purchase the property as a result of misrepresentation in the auction brochure to the effect that NCP was a contractual licensee whose occupation could be terminated giving 3 months notice. In fact, NCP was a business tenant protected under the Landlord and Tenant Act 1954 * C sought damages for misrepresentation to cover the payment made to NCP; D claimed that any misrepresentation was a misrepresentation as to law and there was a long standing rule that statements of law were not actionable **Held:** HL referred to the decision in Kleinwort Benson Ltd v Lincoln City Council [1992] 2 AC 349 where it was held that it was not the case that there was no remedy available for a mistake of law; consequently a misrepresentation of law could be an actionable misrepresentation

Answer 5

* Opinion * Future Intention * Silence but half truth, change in circumstance

Answer 6

*'a statement of a belief based on grounds incapable of actual proof’* **(Cheshire, Fifoot and Furmstone, 2012)**

Answer 7

A statement of opinion is not a statement of fact

Answer 8

**Bisset v Wilkinson (1927)** * Contract for purchase of land in New Zealand * During negotiations, it was stated that “with a good six-horse team, my idea was that it would carry two thousand sheep” (merely an estimation on how many sheep can graze) * Reference to number of sheep was a statement of opinion, as the farm had never previously been used for grazing sheep (this was an estimation because he does not really know) **Held:** * No misrepresentation (because there is no statement of fact) * This was only an opinion and had not been made by an expert

Answer 9

A statement provided by an expert that requires a higher duty of care

Answer 10

**Esso Petroleum Co Ltd v Mardon (1976)** * Esso represented to a prospective purchaser of a petrol station that they would be likely to sell 200,000 gallons by the third year of operation * Local council gave planning permission to operate the petrol station, but with no access from main road, but Esso still confirmed figures * Purchaser bought the petrol station but the business did not go well and it only sold 78,000 gallons in the first 15 months **Held:** * Negligent misrepresentation * Esso had special expertise that gave rise to a duty to take reasonable care to ensure the representation was correct Different from giving an opinion **Smith v Land and House Property Group (1884)** * P advertised a hotel for sale stating in the particulars that it was ‘let to Mr Frederic Fleck (a most desirable tenant)…thus offering a first- class investment’. * In fact, the tenant was in rent arrears at the time of sale and soon declared himself bankrupt * B refused to complete the sale on finding out the truth and were sued for specific performance of the contract **Held:** Since the vendor was in a better position to know the true facts of the situation, his statement could not be regarded as one of opinion, but as one of fact

Answer 11

A representation as to future conduct is not actionable misrepresentation as the statement is not a statement of fact

Answer 12

Actionable Misrepresentation arises where: * Statement of Intention is made * it induces another to enter into contract * maker knew that their promise would not be carried out

Answer 13

**Edgington v Fitzmaurice (1885)** * Directors of a company issued a prospectus inviting subscriptions for debentures, stating object of the issue was to complete alterations in the company’s buildings, to purchase horses and vans, and to develop the trade of the company * Real object of the loan was to enable the directors to pay off pressing liabilities * Plaintiff lent money relying on these statements and was also under the erroneous belief that the prospectus offered a charge upon the company’s property * Company became insolvent They must have known that they had these liabilities **Held:** * Material misstatement of fact, influencing plaintiff’s conduct

Answer 14

1. Material Representation 2. Intended to be acted upon 3. Acted upon - reliance

Answer 15

**Peek v Gurney (1873)** * Company prospectus for share allotment did not provide for company’s liabilities * Shares were purchased and eventually company was wound-up (insolvent) **Held:** * No misrepresentation (in modern terms it would not be as easy to get away with this as there is legislation required) * Purchaser relied on the market to buy the share and not on the prospectus

Answer 16

It would not be as easy to get away with no misrepresentation as there is now legislation required

Answer 17

**Hayward v Zurich Insurance Co (2016)** * Hayward injured his back in a work accident * Insurer, relying on video evidence which showed Hayward undertaking heavy work at home and argued he exaggerated consequences of injury * Parties reached an agreement and insurer agreed to pay £134,973 in full and final settlement of claim * Two years later, insurer discovered Hayward had entirely recovered from his injury at least a year before settlement was reached and claimed damages for deceit based on fraudulent misrepresentations **Held:** * Insurer could set aside settlement agreement because of Hayward's fraudulent misrepresentation * Insurer did not have to prove that it initially settled because it believed the misrepresentation was true **Redgrave v Hurd (1881)** * Hurd told Redgrave his business made £300-£400 per year during sale negotiations * Hurd gave Redgrave a lengthy and complicated set of accounts, which showed the business made nothing like that amount * Redgrave still bought the business in reliance upon Hurd's statement **Held:** * Contract could be rescinded for innocent misrepresentation * The law aims to stop people being misled, which Redgrave clearly had been, even though he should have had accounts professionally verified

Answer 18

1. Fraudulent 2. Negligent at Common Law 3. Innocent 4. Effect of Misrepresentation Act 1967

Answer 19

A false statement 'made knowingly, without belief in its truth, or recklessly, careless whether it be true or false' - Derry v Peek (1889)

Answer 20

Claimant must prove that the representation was made dishonestly in that the defendant : * Knew that he was making the statement/knew what he was saying * Had conscious knowledge/knew that he was not telling the truth * Inducement/reliance

Answer 21

**Derry v Peek (1889)** * Under a special Act of Parliament, a company could run trams by animal power, and with Board of Trade consent, by steam or mechanical power * The company invited applications for shares from members of the public and stated in the prospectus that they had the power to run trams by steam power * They assumed that Board of Trade permission would be granted, but it was not, and the company was wound up **Held:** * No fraudulent misrepresentation * Directors were not liable as they honestly believed the statement to be true and that approval was forthcoming **Doyle v Olby (1969)** * C saw D’s advert for the sale of an ironmongers’ business. When C made further inquiries, D provided the last three years’ accounts. These showed considerable profit * The brother of the defendant’s director also told C that all trade was over the counter. C agreed to buy on the condition that C covenanted not to compete with the business within a ten-mile radius for five years. * After the sale, C discovered that the company’s profits were exaggerated. They also discovered that half the trade had been earned by a director’s brother as a travelling salesman. Meanwhile, a company associated with the defendant began poaching C’s potential customers in the area. C suffered substantial loss and eventually had to sell the business. **Held** * Fraudulent misrepresentation. * C was tricked into buying a business he otherwise would not have bought. As such, he was entitled to his overall loss up until he sold the business, minus any benefits he received.

Answer 22

On the claimant to establish inducement

Answer 23

The test for inducement can be found in **BV Nederladse Industrie Van Eiprodutken v Rembrandt Enterprises Inc (2019)** The test is that the : * representee has to prove he has been materially induced by the representations in that they were actively present in his mind * **Presumption of Inducement**: an evidential presumption of fact that the representee was induced by a fraudulent statement and it will be very difficult for the representor to rebutt this presumption (but is rebuttable unlike a presumption of law which is not or can only be done in a certain way)

Answer 24

LJ Longmore

Answer 25

A statement maker believes the statement to be true (the statement maker is honest) but has been careless in reaching that conclusion.

Answer 26

* Common Law negligent misrepresentation * Statutory misrepresentation under the Misrepresentation Act 1967

Answer 27

Claimant must show that D: * owed them a duty of care - this only arises when the representor had assumed a responsibilty for the representation towards the representee , must be a **special relationship** between the parties that gives rise to special duty of care * representation * inducement/reliance - it must be reasonable for the rpresentee to rely * breached that duty * breach caused C's damage - was not too remote (causation in law and causation in fact)

Answer 28

mainly to physical injury/property damage

Answer 29

It covers situations of negligent statements resulting in pure economic loss to the claimant When there is no contract between the party and the negligent statement is relied on ,by the representee from representor, to enter a contract and suffers economic loss ,representor may be liable for the statement if the representor had assumed responsibility | don't have to know verbatim but know general gist

Answer 30

* Hedley Byrne were a firm of advertising agents * They intended to advertise on behalf of Easipower Ltd and wanted to know if Easipower were creditworthy, so asked their bank to find out * The Bank got in touch with Easipower's bankers, Heller & Partners, and Heller wrote to the Bank, "in confidence and without responsibility on our part," that Easipower were good for £100,000 per annum on advertising contracts...” * Hedley Byrne relied on this statement in placing orders on behalf of Easipower and lost more than £17,000 when Easipower went into liquidation ○ Hedley Byrne relied in Easipower's bank to ensure that they would provide the correct information ○ The bank assumed a high level of responsibility **Held:** * Court found no liability in Heller (because of the reliance on the exclusion clause!),**but declared that a negligent misstatement may give rise to an action for damages for economic loss**

Answer 31

Genuine belief in truth of the statement Statement maker honestly believes: * statement is true * has reasonable grounds

Answer 32

**Whittington v Seal Hayne (1900)** * Whittington purchased a poultry farm based on an innocent representation that the farm was sanitary and in good condition ○ This was the inducing factor * However, the water supply was poisoned due to the state of the premises * Whittington’s manager got sick and as a result, the poultry died * Whittington had to carry out repairs, pursuant to a covenant in the contract * Whittington sought rescission of the contract **Held:** * Innocent misrepresentation and the contract could be rescinded * However, High Court distinguished what costs might be recoverable under the contract (eg: cost of rent and repairs allowed, but loss of poultry/medical expenses were not allowed – not accounted for under the contract)

Answer 33

**Common Law:** * Damages: monetary compensation to restore innocent party to position it would have been in if breach had not occurred (Causation and remoteness) **Equity:** * Rescission: Setting aside an agreement and restoring parties to their pre- contractual positions **Statute:** * Misrepresentation Act 1967 **Rescission:** * Termination by right * Court order setting aside contract, to restore parties to pre-contractual position Damages - Fraudulent Misrepresentation

Answer 34

**East v Maurer (1991)** * Maurer ran two hairdressing salons in neighbouring areas. East purchased one of the salons. During negotiations, Maurer had falsely represented that he personally would not be working at his other salon. * East failed to make a profit, and discovered that Maurer was working full time at his salon. East was unable to sell the salon for three years. **Held** * Damages for deceit were assessed on the basis that East should be compensated for all losses suffered, and that where the losses were made in the course of running a business, the assessment of damages would include both actual losses incurred and loss of profits that could reasonably have been anticipated. **Archer v Brown (1984)** * D sold P the share capital of a company he had already sold several times over; in due course he was convicted of fraud. * P financed his purchase by a bank loan. P claimed return of the £30,000 he had paid D, and damages for deceit including the interest he had been charged on the bank loan. D conceded P was entitled to rescission but claimed that was the limit of his liability as interest on the bank loan had been incurred through P's lack of funds. **Held** * That the concession made by D could not deprive P of his right to claim in deceit, but in any event damages could be awarded in addition to rescission as the misrepresentations had been fraudulent

Answer 35

**Hedley Byrne v Heller (1964)** This case demonstrated that: * Damages based on a tortious measure (i.e. common law tort of negligence) * Claimant can only recover for the loss that was reforeseeable at time of breach of duty of care, i.e. * C must show that the type/kind of loss he/she suffered not too remote – The Wagon Mound (No. 1) [1961] AC 388 remoteness test- whether the type of loss sustained by C was a reasonably foreseeable consequence of the breach of duty of care

Answer 36

Where a negligent statement induces them to enter an agreement but led to mainly financial loss | already answered in a previous flashcard

Answer 37

Mentions: * fradulent misrepresentation Does not mention: * measure of damages

Answer 38

The case of **Royscot Trust Ltd v Rogerson** measured the damages fraudulent misrepresentation in the tort of deceit. Claimant entitled to recover all loses even of those losses were unforseeable, provoded they are not otherwise too remote

Answer 39

**Howard Marine and Dredging Co Ltd v Ogden and Sons (1978)** * P owed 2 sea barges and negotiated with D (civil engineers) for hire of the barges * P’s manager provided a figure as to the deadweight capacity of the barges based on Lloyd’s Register, which was in fact incorrect * The correct figure could have been ascertained from ship’s documents, which were in P’s possession * D agreed to take the barges, six months later discovered the correct capacity and refused to pay the full hire * P claimed the outstanding hire charges and D counterclaimed under the Misprep. Act 1967 s2(1) on basis of misrep. as to the barge’s capacity **Held:** * P failed to prove that their manager had reasonable grounds to believe and did believe up to the time at which the contract was entered into, that the facts represented were true, since the correct figure was contained in the ships’ documents and failed to show any ‘objective reasonable grounds’ for relying instead on the Lloyd’s Register.

Answer 40

TRUE, but the court have discretion to award damages in lieu of rescission under Section 2 Ss 2 of the MA 1967

Answer 41

It makes the contract Voidable - meaning that the claimant has the right to elect to avoid (or rescind the contract) or to affirm the contract

Answer 42

**Car and Universal Finance Co Ltd v Caldwell [1965]** * A person was induced by fraud to sell his car to a crook. The crook's cheque bounced, and the crook could not be found * The crook sold the car to motor dealers. They sold it to a finance company * Once the cheque used by the rogue bounced the owner informed the police and the Automobile Association, and asked them to find his car. It was held that the title to the car was vested in the first buyer as he had rescinded the contract of sale when he asked the police to recover the car

Answer 43

**Whittington v Seal Hayne (1900)** * C leased a poultry farm; C alleged that they were induced to take up the lease because of the representation made by D’s agents that the premises were in sanitary condition and in good state of repair * This was not the case-the water supply was poisoned; the poultry died, and the farm manger became ill * C had to carry out extensive repairs to the property and sought an indemnity **Held** - Innocent misrepresentation. But claim would fail as damages cannot be recovered for innocent misrepresentation

Answer 44

* Damages available for: Fraudulent Misrerpresentation Negligent Misrepresentation Innocent Misrepresentation (only from the MA 1967) * Rescission bars to rescission

Answer 45

* Damages for fraudulent misrepresentation based on tort of deceit * Aim to place C in the same position they would have been in had the wrongful act not been committed * General rule- measure of damages in tort limited by principle of remoteness of damage: * D only liable for loss that is reasonably foreseeable * But remoteness of damage does not apply in fraud: * C can recover for all direct losses as a result of the transaction that was induced by fraud, regardless of foreseeability- Doyle v Olby

Answer 46

**East v Maurer (1991)** * Maurer ran two hairdressing salons in neighbouring areas. East purchased one of the salons. During negotiations, Maurer had falsely represented that he personally would not be working at his other salon. * East failed to make a profit, and discovered that Maurer was working full time at his salon. East was unable to sell the salon for three years. Held - damages for deceit were assessed on the basis that East should be compensated for all losses suffered, and that where the losses were made in the course of running a business, the assessment of damages would include both actual losses incurred and loss of profits that could reasonably have been anticipated. **Archer v Brown (1984)** * D sold P the share capital of a company he had already sold several times over; in due course he was convicted of fraud. * P financed his purchase by a bank loan. P claimed return of the £30,000 he had paid D, and damages for deceit including the interest he had been charged on the bank loan. * D conceded P was entitled to rescission but claimed that was the limit of his liability as interest on the bank loan had been incurred through P's lack of funds. **Held** that the concession made by D could not deprive P of his right to claim in deceit, but in any event damages could be awarded in addition to rescission as the misrepresentations had been fraudulent

Answer 47

* Affirmation * Lapse of Time * Restituto in Integrum

Answer 48

Once the claimant affirms a contract, they cannot retract it **Long v Lloyd (1958)** * The plaintiff bought a lorry from Lloyd, who told him it was in excellent condition. On the first journey it broke down and the plaintiff discovered numerous serious defects. * He told Lloyd who agreed to pay half the cost of repairing of the defects. This was done but on the next journey the lorry broke down again. The plaintiff tried to rescind the contract. It was held that the plaintiffs had affirmed the contract, which could not be rescinded. He had accepted the money towards the repair, and had undertaken the second journey.

Answer 49

Lapse of time is the idea that recission must take place in a reasonable amount of time. This is seen with **Negligent, Statutory and innocent Misrepresentation** this however *does not* apply to **fruadulent misrepresentation** **Leaf v International Galleries (1950)** * Leaf bought a painting which he was told was a Constable, but did not examine it for 5 years, until he wanted to sell it. * The examination revealed that it was a fake. **Held:** that was too late to claim rescission.

Answer 50

Rescission not available where it is impossible to return parties to their original position **Thomas Witter v TBP Industries (1996)** * In December 1989, D, a conglomerate negotiated the sale of a carpet company to P. In the course of so doing D negligently misrepresented that there was a special one-off expense of £ 120,000 in accounts produced, and that those accounts spread the bi-annual expense of producing pattern books over two years instead of immediately writing it off. * The sale contract included a provision stating that P acknowledged it had not been induced to enter into the agreement by any representation or warranty, and a contractual limitation clause that D was not liable for a breach of the agreement unless written notice was given by January 1, 1992. **Held-** P was entitled to damages and it was impossible to rescind the contract.

Answer 51

The contract held to have no effect and any money/property must be returned

Answer 52

**William Sindall Plc V Cambridgeshire County Council (1994)** * Claimant agreed to purchase land for development from Defendants * Claimants argued Defendants made a misrepresentation that there were no easements over the land, when in fact there was a private sewer under the site * Court of Appeal held no misrepresentation, but rather a party trying to escape a bad bargain and courts would not allow them to rescind the contract when cost of making good the misrepresentation was relatively trivial * Case is useful, as Obiter discussion on s 2(2) suggests the courts will consider the following factors as relevant when exercising the discretion to award damages instead of allowing rescission of the contract: a) Importance of the representation to the subject matter of the contract b) Loss that would be caused to the misrepresentee party by the misrepresentation, if rescission is refused versus the loss that would be caused to the representee by the rescission --> weighing this up before activating S.2(2)

Answer 53

**William Sindall Plc v Cambridge County Council (1994)** Lord Hoffman stated that the court must weigh: * The seriousness of the misrepresentation * Whether the representee will suffer greatly if not allowed to rescind * whether the representor would suffer unduly if rescission were allowed

Answer 54

Cannot limit liability for misrepresentation, except if it satisfies the requirement of reasonableness as stated in section 11 (1) of the Unfair Contract Terms Act 1977

Answer 55

For B2B contracts - exclusion is subject to requirement of reasonableness (section 11 (1) Unfair Contract Terms Act 1977) For B2C contracs - exclusion is subject to fairness (section 62 Consumer Rights Act 2015) - ensures that there is no significant imbalance

Answer 56

**First Tower Trustees Ltd v CDS (Superstores International) Ltd [2018]** * First Tower had leased warehouse premises to the CDS. By cl.5.8 of the lease, CDS acknowledged that it had not entered into the lease in reliance on any representation made by First Tower. The lease also provided that First Tower contracted in its capacity as trustees of a specified trust and not otherwise. * In its replies to pre-contract enquiries, First Tower stated that it was unaware of any environmental problems relating to the property. However, First Tower was aware of asbestos contamination in the warehouse. Remedial works were necessary to deal with the contamination, and the CDS had to lease alternative premises while those works were carried out. * First Tower relied on cl.5.8 to exclude its liability and CDS argued that such clause did not pass the reasonable test in S3 Misrepresentation Act 1967. * The Court of Appeal rejected First Tower’s claim.

Misrepresentation Flashcards

(80 cards)