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Contract Law Misrepresentation Question
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Misrepresentation
a false representation
Misrepresentation at law
At law damages and rescission were available for misrepresentation only IF it was fraudulent
Fraud
making statement either:(i) knowing it’s not true or(ii) without belief in its truth or (iii) being reckless as to whether it is true - Derry v Peek (1889)
Misrepresentation at law
Only in 1963 did common law first permit damages for careless or negligent misrep/in 1967 statutory damages also became available in some cases
Misrepresentation in equity
In equity no damages, but rescission was granted whether misrep was dishonest or not/Since Judicature Acts 1873-75, all courts can apply law and equity
Misrepresentation
1) False statement of existing fact2) Made by one contracting party to the other3) Which is relied upon in entering into (or ‘induces’) the contract
Mere puffs
i.e. mere sales talk, don’t count as representations, e.g. Dimmock v Hallet (1866) (land described as ‘fertile and improvable’)
Walters v Morgan, and Horsfall v Representation can be made orally, in writing or by conduct Thomas Spice Girls v Aprilia
representation by conduct
Bisset v Wilkinson
General rule is that to be actionable misrepresentation must be of fact not opinion or belief,BUT distinction between fact and opinion is not clear cut
Fact not opinion
Statement of opinion will be treated as fact IF The opinion is not in fact honestly held OR/The opinion implies statement of fact Smith v Land House Property OR/The opinion falls within area of special knowledge or expertise Esso v Mardon
Edgington v Fitzmaurice
Statement of present intention is a statement of fact/ Hence it will be a misrep IF that intention is not genuinely held at the time of the statement However, failure to carry out the intention does not necessarily mean the statement of intention was false when made
Representation of law
A misrepresentation of law is now regarded as actionable – Pankhania v London Borough of Hackney (2004) (applying Kleinwort Benson v Lincoln City Council )
Solle v Butcher [1950]
Distinction between statement of law and statement of fact (or statement of ‘private rights’) was in any case difficult to makee.g. you don't need a licence to sell liquer
Statement by third person
A contracting party is not liable for the misrepresentation of a third party UNLESS/ The third party was authorised to make statement as agent of contracting party OR/ Contracting party was aware of, and did not rebut, the third party's misrep
Silence – duty of disclosure
Generally no liability for remaining silent - Turner v Green (1895); Sykes v Taylor-Rose (2004)
Silence – duty of disclosure Exceptions
half truths - Dimmock v Hallet; Notts Patent Brick v Butler/subsequent falsity - With v O’Flanaghan/contracts of utmost good faith (insurance)/fiduciary relationships, e.g. solicitor and client
Reliance (‘Inducement’)
Misrep must ‘induce’ contract, i.e. have been relied upon – JEB Fasteners v Marks Bloom
Horsfall v Thomas
So misrepresentee must aware of misrepresentation
Edgington v Fitzmaurice
It need not be sole reason, as long as it is one of the reason
Peek v Gurney (1873 )
Statement must be intended to be acted upon
Redgrave v Hurd
Chance to discover truth
Museprime Properties v Adhill
Reliance does not have to be reasonable
The remedy available varies depending on the type of misrepresentation
1) Fraudulent = knowing or reckless 2) Negligent = honest but careless 3) Wholly innocent = honest and careful
Misrepresentation- Remedies
Rescission/damages/statutory liability
Rescission
means returning parties to their original position before the contract/It’s available for all 3 types of misrepresentation (fraudulent, negligent, and wholly innocent)/Contrast rescission for misrep with termination for breach (see Discharge)
How to rescind
Requires communication
What if other party cannot be traced?
take all reasonable steps to communicate is sufficient to rescind Car & Universal Finance v Caldwell (1965)
Four bars to rescission
1) Affirmation Long v Lloyd (1958)/2) Lapse of time Leaf v International Galleries (1950)/3) Restitution is impossible Clarke v Dickson (1858), Erlanger v New Sombrero Phosphate Co (1878)/4) Third party rights affected
Damages
Rescission is not always an adequate remedy/First, right to rescind may be lost for one of 4 bars, or misrepresentee may choose not to exercise this right/
Damages (con.)
Second, rescission by itself will not be sufficient if the misrep results in consequential losses/In these two cases damages may be available
Damages at common law 1#
/Up to 1963, damages at common law limited to fraudulent (dishonest) misrepresentation - tort of deceit
Fraud
means maker of statement either/knows it to be false, or doesn't believe it to be true, or/is reckless as to whether or not it’s true - Derry v Peek (1889)
Fraud
needs high standard of proof
Fraudulent misrep: measure of damages
all direct loss whether foreseeable or not Doyle v Olby (1969)/May include lost profit East v Maurer (1991)
Negligent misrepresentation
Hedley Byrne v Heller (1963) maker of careless, but honest, statement may be liable provided there is a “special relationship”
Measure of damages
all direct loss as long as reasonably foreseeable
Negligent misrep
common law/ statutory liability
s.2(1) Misrepresentation Act imposes liability if
A misrep is made by one contracting party to another before the contract which causes loss to that other party AND/ Party making statement cannot prove he had reasonable grounds to believe, and did believe, the truth of the statement up to the time of the
S.2(1)Reasonable grounds
Howard Marine v Ogden (1978)
Measure of damages
fiction of fraud – Royscot Trust v Rogerson (1991). Is Royscot correctly decided? Smith New Court Securities (1997)
Innocent misrepresentation
Before 1967 only remedy for wholly innocent misrep was rescission
s.2(2) Misrepresentation Act
the court has power to award damages instead of rescission - William Sindall
If right to rescind is lost, is court’s power to award damages Thomas Witter v TBP, Zanzibar v British Aerospace instead also lost? NOT for fraudulent misrepresentation/But under s.3 Misrepresentation Act 1967 a party can exclude or restrict: Liability for misrep; or Any remedy for misrep/ Provided that the term is reasonable within s.11(1) UCTA 1977
Exclusion of liability -1
Exclusion of liability - 2 Scope of Clauses defining an agent’s authority/‘Entire agreement’ clauses/Non-reliance clauses s.3 Clauses defining an agent’s authority
Overbrooke Estates v Glencombe Properties (1974)
‘Entire agreement’ clauses
McGrath v Shah (1987)
Non-reliance clauses
Cremdean Properties v Nash (1977); Watford Electronics v Sanderson (2001) Created by: kudoak
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