What is an actionable misrepresentation?
Representation = a statement asserting the truth of a given state of facts
An a) unambiguous b) false c) statement of fact d) made to the claimant e) inducing them to enter into the contract with the statement maker
Each letter indicates an element; all must be present
What are the consequences of a misrepresentation?
Subject to limitations
Makes the contract voidable - wronged party must take action to rescind the contract
What do unambiguous and false mean in terms of the definition of misrepresentation?
Unambiguous = clear and has meaning put forward by representee
False = will not be false if substantially correct (i.e. can be true without being entirely correct)
If the representee places own unreasonable construction on representation, can representor still be liable?
No
What amounts to a ‘statement of fact’ in the context of misrepresentation?
Must be a statement asserting a given state of affairs, includes…
- Conduct (e.g. intentional concealment of dry rot)
- Statement of law
What does not amount to a ‘statement of fact’ in the context of misrepresentation?
- ‘Mere puffs’ do not count (e.g. salesmen/estate agents have lots of leeway when advertising)
- Statements of opinion, future intention and instances of silence (not actionable on the face of it)
Note there are exceptions!
What are the 2 tests for inducement in misrepresentation
Either…
- Representee shows statement would have influenced reasonable person + representor cannot show the statement did not influence particular representee (i.e. it was material)
or
- Representee shows that it was personally induced by the statement (subjective)
In what 3 circumstances can a representee not be induced?
I.e. the statement was…
Where…
- Statement was not communicated to them
- Statement did not affect decision to enter contract
- Statement known to be untrue by representee
Does the misrepresentation need to be the only reason the claimant entered the contract?
No! Another reason can contribute even if it that reason was a mistaken belief (and even if that mistaken belief was the decisive factor)
Edgington - plaintiff induced to lend money to company by false representation in company prospectus (misrepresentation) and more decisively the beliief that he would have a charge on assets of company if he made loan (mistaken belief) - was able to sue for fraudulent misrepresentation
What if a representee chooses to test the validity (investigate) of the representor’s statement?
Even following wildly exaggerated misrepresentations
A party cannot bring a claim in misrepresentation if they rely on their own investigations rather than the misrepresentation
Separate enquiries = vendor’s statement not relied upon
Attwood - vendor of mine made wildly exaggerated statements about earning capacity which purchaser did not believe - sent own agent to make report and they produced a similar report to the vendor - mine turned out to be virtually worthless - misrepresentation claim was dismissed as purchaser did not rely on statement of vendor but was induced to purchase mine on strength of own agent’s report
Will separate enquiries alone always invalidate a claim for misrepresentation?
No - only if they can show that purchaser did not rely on vendor’s statements
Is there a duty to check misrepresentor’s statements?
No
Can contributory negligence be a defence for the misrepresentor in a case of misrepresentation?
Yes - if a representee does not check where the court considers it reasonable for them to have done so/carries out negligent investigation
Bar where misrepresentation is fraudulent
What is the general rule on statements of opinion, statements of future intention and silence?
They cannot amount to statements of fact on which misrepresentation claim can be based
What are the 2 exceptions to statements of opinion?
Where statements of opinion can result in a claim for misrepresentation
- If the representor has greater knowledge than the representee (esp if no reasonable grounds to hold opinion) - if parties have equal knowledge, less likely to be misrepresentation
- If the opinion expressed is not one which the representor held (believed)
In both cases will be a statement of fact
Esso - Madron took lease of petrol station after being assured by Esso representative that annual throughput would be 200,000 gallos of petrol per year (inaccurate estimate!) - estimated gallonage never reached and petrol station was uneconomic - Mardon brought misrepresentation claim, court held Esso had carefully estimated potential sales based on substantial skill and expertise
What are the exceptions to a statement of future intention?
Where statements of future intention can result in a claim for misrepresentation
If when someone makes the statement re future intention, knowing they cannot do what they state or they do not intend to do it, they misrepresent their existing intention (are stating an intention to do something which is untrue; a promise that they never intended to keep)
- Excluding promises regarding future intention that are prevented from following course of conduct or circumstances change to change their mind about intention
Wales - divorce settlement negotiated on generous basis that woman would remain single - prior to conclusion of settlement the wife agreed to marry another and did not communicate this change of intention - husband sought to rescind on non-disclosure but court held wife had not misrepresented when she told her current husband she would not remarry
What are the 3 exceptions to silence?
Where silence can result in a claim for misrepresentation
- Half-truths: making a statement but not disclosing the full picture (e.g. describing a property as ‘fully let’ where tenants have given notice to quit is a misrepresentation)
- Continuing representations: If a party fails to correct a previously-correct but now-incorrect statement and allows party to enter into contract on basis that it is true (medical professional selling practice made statement at beginning of negotiations that income of practice was at a certain level, but this had fallen to almost nothing by time of sale and this was not communicated)
- Contracts uberrimae fidei (utmost good faith): a duty to disclose material facts in some type of contracts where one party in particularly strong position to know material facts (e.g. disclosure of all material facts must be made to insurer)/where there is a FD (e.g. company/directors, Ts/Bs)
What are the three types of misrepresentation?
The type determines the available remedies
- Fraudulent (tort of deceit)
- Negligent (statutory claim under MA)
- Innocent (statutory claim under MA)
What is fraudulent misrepresentation? On whom is the burden of proof?
- A misrepresentation that has been made a) knowingly or b) without belief in its truth or c) recklessly re whether true or false
- Burden of proof on C
This is hard to prove!
Recklessness = a flagrant disregard for the truth
Nothing short of fraud will sufficent; must be deliberate or dihonest and not due to inadvertence/failure to realise requirement of disclosure
What is negligent misrepresentation? On whom is the burden of proof?
- D will be liable for negligent misrepresentation where they cannot prove they had reasonable grounds to believe and did believe up to the time the contract was made that the statement was true
- Burden of proof on representor - show they had reasonable grounds
Howard - Ogden hired 2 barges from Howards, who had told Ogden that barges capacity was 1600 tonnes when it was actually 1055 tonnes - true figures in ships’ documents and Howard failed to show any ‘objectively reasonable ground’ for disregarding figure in documents - negligent misrepresentation
If a representor is found liable for negligent misrepresentation, what will they be treated as having made?
Will be treated for all intents and purposes as if they have made a fraudulent misrepresentation - important re damages
What is innocent misrepresentation?
One made not fraudulently or negliently - representor:
a) Proves they had reasonable grounds for belief in truth
b) Proves they believed up to time of contract that what they were saying was true
What is the test in terms of knowledge of the representor for each type of misrepresentation?
- Fraudulent - representee to prove representor made statement knowing untrue/without belief in truth/reckless as to truth
- Negligent - representor fails to show reasonable grounds to believe true and/or not believing true up until contract made
- Innocent - representor has shown reasonable grounds to believe and actual belief up until contract made
What remedies are available for misrepresentation?
- Rescission - contract becomes voidable not void (representee must communicate intention to rescind or initiate proceedings for rescission)
- Indemnity - cover expenses for obligations assumed as a direct result of the contract
- Damages
Can be a combination
