Misrepresentation

 An actionable misrepresentation is an unambiguous false statement of existing fact or law

which induced a party to enter into the contract.
 Where a party attempts to exempt liability for a misrepresentation this attempt will generally
be subject to the test of reasonableness in the Unfair Contract Terms Act 1977 by virtue of
the Misrepresentation Act 1967 s.3. [B2B]
 However, s.3 will not apply to a contract between a trader and a consumer which will be
subject to a test of fairness under the Consumer Rights Act 2015 (s.62 and Schedule 4)

The following elements must be proved to establish actionable MR.

1. An unambiguous false statement of existing fact or law
i. Statement – generally it is by words spoken or written. But conduct can also be
treated as a statement [ spice girls v Aprilia]
There is no general duty to disclose information to the other party; caveat emptor [let
the buyer be aware]
Therefore, remaining silent is not misrepresentation.
But there are exceptions. If the law recognises a duty to disclose information, failure
to do will be misrepresentation.
a. Contracts which are treated as being of the utmost good faith[ parties are obliged to
disclose info even if not asked] insurance company. Lambert v co-operative insurance
society ltd [1975]
b. Rep or statement made is falsified by later events – either it was true when making the
contract or it was believed to be true but became false later. With v O’Flanagan [1936]
c. Statements are literally true but misleading[ half-truth] if the maker has failed to
disclose ALL relevant info. Dimmock v Hallet [1866]

ii. Unambiguous – the statement must be clear Dimmock v Hallet [1866]

iii. False – representation is false where either it is wholly incorrect or misleading to a
material extent as in Dimmock v Hallet [1866]
iv. Statement of existing fact or law – it should be an statement of existing fact or law
therefore, mere puffs are not statements of facts, statement as to intention is not fact,
statement of opinion and belief is not a statement of fact [ Bisset v Wilkinson [ 1927]

But there are exceptions :-

 where a person expressing the opinion is aware of facts which indicate that the
opinion cannot be sustained. Smith v Land house coporation [ 1884], esso
petroleum v mardon.
  Where there is evidence that the person making the statement does not believe it
at the time that it is made. Edgington v fitsmaurice.

A person who fails to carry out his stated intention does not thereby make a misrepresentation;
Wales v Wadham [1977]. But a person who misrepresents his present intention does make a false
statement of fact because the state of his intention is a matter of fact [ have to see if he was
genuine at the time of making the statement] Edington (1885),

2. It must be addressed to the party misled

It can be directly communicated or to a 3rd party with the intention that it reaches the
intended receiver.
Commercial banking Co of Sydney v RH Brown and Co [1972]

3. The statement induced the other party to enter into the contract.

It should be the reason why the claimant had entered into the contract it need not be the
sole or main reason; Edgington v fitsmaurice.
It must be showed that the stamen was real and substantial and had played a part in
making the contract. If the MR induced a reasonable person the court would consider that
it induced the claimant as well ; Museprime Properties v Adhill properties [ 1991] ,
Raiffeisen Zentralbank Osterreich AG v Royal Bank of Scotland

But if claimant would be unable to claim MR if he falls under the following.

i. If the representee was aware of the untruth statement.
ii. Where representee relied on his own judgement or upon an independent report
specially obtained.
iii. The representee had not allowed the MR to affect his judgment.
iv. The representee was not aware of the MR.
v. The representee would have entered the contract even if aware of the untruth.

EFFECT OF MR ON VALIDITY OF CONTRACT

Contract becomes VOIDABLE if MR is established. This means the contract is valid until the
representee chooses to avoid the contract by seeking remedy of recission.
REMEDIES FOR MR
Two remedies
1. Rescission
2. Damages
The remedy applicable will depend on whether is was made innocently, negligently, or
fraudulently. This distinction becomes extremely relevant when claiming damages for MR.

 Fraudulent MR [tort of deceit] – defined in Derry v Peek [1889] lays down the
requirement. the maker of the statement knows or believes that the statement was
untrue, or doesn’t care whether it is true or false. [ basically lying]
burden of proof remains with the claimant. But it is a heavy one.

There must be proof of fraud, burden of proof remains with the claimant.

 Statutory misrepresentation – the Act has created a fiction of fraud. If claimant

can prove that there was a MR brining a claim under the act then the burden will
shift to the representor to prove that they had reasonable grouds to believe and
belived that it was true. If it was proved then it would be a misrepresentation not
made fraudulently but negligently under s.2(1) MRA 1967. Remedy is the same
as if the statement was made fraudulently.

 Negligent MR – when a person makes a statement believing it to be true but

doesn’t have any reasonable ground to hold that belief.
Liability for negligent MR can arise either under common law or under s.2 (1)
MR Act 1967.
Common law – Hedley byrne v heller [ 1964] if the parties are in a special
relationship giving raise to a duty of care.

 Innocent MR – where the maker of the statement genuinely believe that it is true
and has reasonable grounds for his belief then the action only lies for innocent
MR

RESCISSION- parties are put in their pre contractual position.

Situations where the right to rescind will be lost :-

  When a party to contract becomes aware of the other parties MR but continues
with the contract and thus ‘affirms’it. ; long v Lloyd [1958]
 Where there is significant lapse of time between the making of the contract and
the discovery of the MR. [ rescission is an equitable remedy, and delay defeats
equity.
Leaf v international gallaries[ 1950]
But if it is a FMR the time will start to run against claimant only from the time
MR was discovered and not the time it was made.
 Where restitution is impossible; lagunas Nitrate Co. v Lagunas Syndicate
 Where rescission would affect the rights of the third party.
Recission is not available where the contract has already been performed and it is impossible for
the parties to be put into the positions they would have been had the contract not occurred at all.
However, the MRA 1967 provides that the court can award damages in leu of recission where
the court thinks it is equitable to do so [ s.2(2)] – salt v starstone specialist

DAMAGES – Damages are available for FMR and NMR, under tort of deceit and s.2(1) of the
MRA 1967
 FMR – damages may be claimed by suing under tort of deceit. The claimant has
to prove it was fraudulent.
According to DOYLE V OLBY reliance loss could be claimed and not expectation
loss.

 NMR – under the Act you will get the damages at level of the tort of deceit

How to answer

1. Identify if it is a term or a misrep

2. Asses whether it is a false unambigues statement of fact or law.
3. What is the type of MR
4. What the remedies are

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