6.3.4 MISREPRESENTATION fone farty.has been induced to enter into a contract by a factual statement which turns out to be untrue-he will have a remedy even though the statement has not become a term of the If a statement is a term and turns out.to be untrue, there is a breach of contacts statement is a representation, the aa will depend on whether the staternént was made fraudulently, negligently o1 ntly. ‘The statement must be of fact, not law: Solle v Butcher (1950) see Unit 6.3.5 ‘Nor must the statement be opinion. In Smith v Land and House Property Corporation (1884) a hotel was advertised for sale and the tenant was described as ‘a most desirable tenant’. The tenant became bankrupt before the sale and the defendant company refused to complete their purchase of the hotel, claiming the contract to buy was voidable because there had been a. misrepresentation about the tenant. The Court held this was a representation of fact, rather than opinion, and that the contract was therefore voidable. The distinction between fact and opinion was explained by Bowen LJ: ‘In a case where the facts are equally well known to both parties what one of them says to the other is frequently nothing but an expression of opinion ... but if the facts are not equally well known to both sides, then a statement of opinion by on8 whoknows the facts best makes very ofien a statement of material fact, for he impliedly states that he knows facts which justify his opinion." Note that the Property Misdescriptions Act 1991 makes it a criminal offence for an estate agent to make a ‘false or misleading statement” in the course of business. ‘Nor must the statement be intention. In Edgington v Fitzmaurice (1885) directors stated that they intended to use money for expanding the business, in fact, they intended to useit to pay off debts. Their conduct was held tobe fraudulent, a the statement was not about rere future intention but was a statement of fact. Bowen LJ std: ‘The state of a man's mind 15s much a fact atthe state of hs digestion. It is trae that i is very dificult prove what the state of a man’s mind at a particular tne i, but, if it cam Be ascertained, iti as much a fact 1s anything ele." Silence will not usually amount to a misrepresentation. The rule generally is caveat emptor: let the buyer beware. But there are exceptions: ‘© Contracts of the utmost good faith, e. insurance contracts, where there js a duty 0 disclose all material facts «Failure to disclose a change of circumstances: Hith v O’Flanagen (1936) a falling-off in the value of a doctors practice. + : ‘© Failure to disclose the complete truth, once a statement is made: Dimmock v Hallett (1866) that all the tenants of farms had been given notice to quit. “The representation must be made toa party tothe contract, In Peck» Gurney (1873) P had bought shares from a third party, relying on statements made in the prospectus issued ‘when shares were sold by the company. It was eld that he could not rely on the statements Thich turmed out to be untrue, because the prospectus was addressed only to the orginal purchasers of shares sold by the company. : “The statement must induce the representee to enter into the contract. In Attwood + Smal (1838) the vendors of a mine exaggerated claims as to its capacity in order to sll Jebut the purchasers appointed their own surveyors to check the accuracy of the statements ‘They reported, quite wrongly, thatthe claims were correct and, relying on this, the purchasers bought the propery, It was held tha they were bound by the contact as they had not relied on the vendors’ statement p Misrepresentations may be fraudulent, negligent or innocent. A fraudulent representation is a fase statement made © knowingly, «© without belief in its sath, oF, © recklesly, careless whether it be true or false. “The plaintiff may claim rescission and damages. The damages are for the tort of deceit. so the measure of damages isto pat the plaintiff in the position he would have been in had the statement not been made. ‘tn untrue statement will be negligent unless the person making the statement can prove that he ad reasonable grounds to believe and did beieve upto te time the contract ree made that the statement was true: s. 2(1) Misrepresentation Act 1967. Ifa party to 2 ontract tres to exclude lability for negligent mistepresentation he can do so only if to do ‘ois reasonable, having regard to the circumstances which were or ought reasonably £9 bi? been known to or in the contemplation of the parties when the contract was made:'s. 3 Misrepresentation Act 1967 and s, 11(1) Unfair Contract Terms Act 1977. The remedy for negligent misrepresentation is damages and/or rescission. If the untrue statement is innocent, that is, the party making it believed it to be true and that belief was reasonable, the misrepresentee can claim rescission or damages in lieu of rescission: s. (2) Misrepresentation Act 1967.