Misrepresentation

Question 1

What is the one feature common to all misrepresentation claims that should be dealt with first?

Answer 1

Must be a statement which one party relies on / that causes them to enter the contract
* Edgington v Fitzmaurice: This need not be the sole reason for entering the contract
* Hayward v Zurich Insurance: Party does not need to think that the statement is true

Question 2

In what circumstances can rescission for misrepresentation be obtained?

Answer 2

• Voidable contracts
• Available in both common law and equity, however it can be obtained even where misrepresentation is not fradulent due to the prevalence of equity (Redgrave v Hurd)
• However, consider distinction of rescission as being an act of the party (self-help remedy) vs an act of the court

Question 3

What does the case of Car & Universal Finance v Caldwell tell us about rescission?

Answer 3

• Actual communication to the other party is not always required in fraudulent misrepresentation
• This occurs where it would be impossible for the party to communicate their wish to the fraudulent party or repossess their property
• COMMON LAW, SELF-HELP REMEDY

Question 4

Does negligence on the part of the innocent party have any role in rescission?

Answer 4

Redgrave v Hurd
* Effect of false representation cannot be got rid of because the other party had been negligent
* No man ought to take advantage of his own false statement

Question 5

How does a statement of fact vs all other statements affect a rescission claim?

Answer 5

• Bisset v Wilkinson: A statement of mere opinion on the subject matter of a sale is not actionable provided that the parties understood it not to be made on any factual basis
• With v O’Flanagan: If a statement has been made that is true but during negotigations become untrue, the person who knows this is under an obligation to disclose the change of facts

Question 6

What equitable bars exist on the right to rescission?

Answer 6

• Rights of Third Parties: Bona fide purchaser for value without notice
• Laches: The length of delay in bringing the claim and the nature of acts done in between that might affect either party or cause inbalance in justice (i.e. taking too long, Leaf v International Galleries, but lapse of a reasonable time, more generous in Salt v Stratstone Specialist)
• Restitutio in Integrum: Recission may not be possible where the property is in a worse condition and cannot be returned in its original state, registration of a car does not prevent this from occuring however per Salt
• Affirmation: Aware of the misrepresentation, but do not care and are happy to go ahead as if it had not been made

Question 7

How would a claimant obtain damages for breach of contract?

NOTE: THIS CANNOT BE COMBINED WITH RESCISSION

Answer 7

• Representation must be a term of the contract, must focus on whether this would be the intention of the parties per Heilbut Symons v Buckleton
• Oscar Chess v Williams: Where a seller makes clear that he has no special knowledge of the facts represented and is merely passing information from an external source, the representation will likely not be incorporated as a term
• Dick Bentley v Harold Smith (Motors): The dealer was in a position to know or at least find out the history of the car, he ought to have known better

Question 8

How does a requirement for damages in breach of contract differ in the context of consumers?

Answer 8

Consumer Rights Act 2015 makes express provisions that elevate some representations, no need to fulfil tests:
* S11(4) & S12(2): Any information given by a seller about goods is to be treated as a term of the contract
* S50(1): Anything said or written by the supplier in a service contract is to be treated as a term to the contract

Question 9

What is the measure of damages if the representation is held to be a term of the contract?

Answer 9

Robinson v Harman, put the claimant in the position you would have been in had the contract been performed
* (E.g. Price was agreed for £100,000. The value of the business with this thing would be £130,000 and without it would be £50,000. Claimant will get £80,000 in damages)

Question 10

How are damages decided in tort measures?

Answer 10

Claimant is put in the position they would have been had the misrepresentation not occured
* (E.g. Price was agreed for £100,000. The value of the business with this thing would be £130,000 and without it would be £50,000. Claimant will get £50,000 in damages)

Question 11

How would a claimant get damages under the tort of deceit?

Answer 11

• Derry v Peek: It is not enough to establish the misrepresentation alone, if there is a honest belief of a statement being true this will not suffice. Must be fraud, that is either done knowingly, without belief it is true or recklessly careless whether it is true or false. Negligence is not fraud.
• Doyle v Olby: If fraud is made out and the tort of deceit can be used, the measure of damages will be all losses flowing from the wrong, does not have to be reasonably foreseeable
• East v Maurer: All other losses directly caused were available, including profits which would have been earned if a different business had been acquired (i.e. opportunity cost)

Question 12

How would a claimant get damages under the tort of negligence?

Answer 12

Hedley Byrne v Heller
* There is a duty of care created by special relationships, which although not fiduciary, give rise to an assumption that care and honesty will be done
* When there is a relationship equivalent to contract (e.g. banker & customer, solicitor & client), must examine facts and examine the particular facts to see whether there is an express or implied undertaking of responsibility
* Does not matter whether the information consists of fact or of opinion or is a mix of both

Esso Petroleum v Mardon
Hedley Byrne applies where there is a contract. One party had all the expertise and knowledge and the other did not

Question 13

What is the effect of s2(1) the Misrepresentation Act 1967?

Answer 13

• S2(1) Creates an action for damages where there is innocent misrepresentation, unless the person had reasonable grounds to believe it true
• Howard Marine & Dredging, burden of proof is on the representor to prove he had reasonable grounds for belief, did not matter that he had relied on a document referred to as the Bible
• Makes a claim in negligence almost virtually impossible, likely only cases where a third party to the contract makes a statement

Question 14

How is the measure of damages different under the Misrepresentation Act?

Answer 14

• Royscot v Rogerson: Damages on the deceit measure are available under the statute since it makes you ‘so liable’ as if you had committed fraud
• Smith New Court: HoL went out of their way to express opinion on the correctness of the decision, said they express no correctness but clearly do not endorse

Question 15

What is the effect of S2(2) of the Misrepresentation Act 1967?

Answer 15

• S2(2) makes it so that even if a person was entitled to rescind the contract, they cannot do so and the court may award damages instead
• This will likely be done where the misrepresentation is trivial and it would not be equitable to the other party to impose rescission, Sindall v Cambridgeshire CC
• Salt v Stratstone Specialist, If there is a bar to rescission then damages s2(2) does not apply as damages cannot be said to be ‘in lieu’ of rescission

Question 16

How does a consumers right for damages under the legislation differ?

Answer 16

S2(4) Misrepresentation Act 1967, a person is not entitled to damages under this section if they have the right to redress under 2008 Regulation

Consumer Protection from Unfair Trading Regulations 2008
- Trader must take part in a prohibited practice, such as misleading statement, omission or agressive under Reg 5-7, and this causes consumer to enter the contract
- Under Part 4A, Reg 27, consumer has the right to redress, meaning they can unwind the contract, get a discount, claim damages (so long as loss is reasonably foreseeable)
- Takes away the potential greater amount of damages, i.e. fiction of fraud, that could be obtained under S2(1) of the 1967 act

Question 17

What is the test for determining an exclusion clause for misrepresentation in non consumer contracts?

Answer 17

MISREPRESENTATION ACT 1967
S3(1) If the contract contains a term which would exclude or restrict liability or any remedy, then it will not be effective unless it passes the s11 UCTA reasonableness test
Unfair Contract Terms Act 1977
S11(1) The term will be fair to include having regard to the circumstances which were or ought to be known in the contemplation of the parties when the contract was made
- Walker v Boyle: Exemption clauses in standard form contracts will not be reasonable where the vendor knows questions being asked will be to obtain information and rely on statements
- First Tower Trustees v CDS: The effect of misrepresentation will be hard to exclude. Agreements by the parties to have not relied on statements (contractual estoppels) will be caught if they exclude liability for misrepresentation

Question 18

What is the test for determining an exclusion clause in a consumer contract?

Answer 18

Consumer Rights Act 2015
S62(4), term will be unfair if contrary to the requirement of good faith it causes significant imbalance in the parties rights and obligations
Sch 2, Para 17 a term which has the object or effect of limiting obligation to respect commitments undertaken by traders agents is unfair

Question 19

What critique can be given about the law on misrepresentation?

Answer 19

ATIYAH & TREITEL: 1967 act is not simple and clear, it superimpose a new structure on top of the law. S2(1) creates the friction of fraud. Argue further codification is needed
BEALE: S2(2) provides no guidance on how damages should be measured, i.e. whether they follow contract or tort. The section ensures there is not abuse of the remedy. If a party loses the right to rescind, they lose the right to damages under this section (calls this a gap but duh)