Misrepresentations

Question 1

3 types of misrepresentations

Answer 1

1. Tort
2. Contract
3. Equity

Question 2

Tort misrepresentations

Answer 2

Negligent, fraudulent, and innocent misrepresentation (Hedley Byrne v. Heller) -> Reliance damages

Question 3

contract misrepresentations

Answer 3

a) Breach of warranty
i) Warranty as to the content of the representation (Heilbut, Murray, Leaf, O’Flaherty dissent) -> Expectation damages
ii) Warranty as to the soundness of the representation (Esso) -> Expectation damages (same amount as reliance damages)
b) Breach of condition (Bollenback, O’Flaherty dissent) -> Expectation damages or restitution if timely

Question 4

equity misrepresentations

Answer 4

Innocent misrepresentation materially inducing a contract (Redgrave, O’Flaherty majority) -> Restitution, if timely

Question 5

warranty

Answer 5

A term in the contract. (Breach yields expectation damages only).

Question 6

condition

Answer 6

A term that is absolutely central to the contract. (Breach yields expectation damages OR restitution, if claimed timely).

Question 7

Hedley Byrne & Co. Ltd v. Heller & Partners Ltd

Answer 7

A party can be liable in tort for a negligent misrepresentation that causes financial loss if there is a “relationship equivalent to contract” where they voluntarily assume responsibility for their statement. However, an explicit disclaimer of responsibility prevents this duty from arising.

Question 8

Esso Petroleum Co Ltd v. Mardon

Answer 8

If a party with special knowledge and skill makes a forecast intending to induce a contract, that forecast constitutes a collateral warranty that the forecast was made with reasonable care and skill. A negligent misrepresentation occurs when a “professional man” gives advice in pursuance of a voluntary assumption of responsibility without exercising a duty to use reasonable care. In such cases, the proper remedy is the reliance measure for the loss the plaintiff suffered (tort damages).

Question 9

Heilbut, Symons & Co. v. Buckleton

Answer 9

A person is not liable in damages for an innocent misrepresentation. To get damages, the statement must be fraudulent, or there must be clear evidence it was intended to be a binding warranty (a collateral contract).

Question 10

Redgrave v. Hurd

Answer 10

An executory contract can be rescinded for an innocent misrepresentation. The law presumes reliance on a material representation, and the misled party’s failure to perform due diligence to discover the truth is not a valid defence.

Question 11

Redican v. Nesbitt

Answer 11

A completed contract for the sale of land can only be rescinded for an innocent misrepresentation if there was fraud or if the innocent misrepresentation resulted in a complete failure of consideration.

Question 12

Leaf v. International Galleries

Answer 12

A contract for the sale of goods may in a proper case be a ground for rescission even after the contract has been completed. However, the right to reject goods is barred once the buyer has “accepted” or is deemed to have accepted them (which occurs when they retain the goods for more than a reasonable time without intimating rejection).

Question 13

O’Flaherty v. McKinley

Answer 13

A completed contract for the sale of goods can be rescinded for an innocent misrepresentation if there is a complete difference in substance (error in substantialibus) and the parties can be substantially restored to their original positions (restitutio in integrum) contra Leaf.

Question 14

Murray v. Sperry Rand Corporation

Answer 14

Affirmations made with the intention of inducing a purchase (including promotional brochures) constitute collateral warranties. A manufacturer can be held liable in damages for breach of these warranties even if they have no direct contractual relationship with the buyer, because the buyer’s purchase from the dealer serves as consideration.