Vitiating Factors – Misrepresentation
Nature of a
Misrepresentation
A misrepresentation only occurs during the formation of a contract. The effect of a misrepresentation is that the contract voidable.
This means the contract remains valid until the party who has suffered the misrepresentation seeks to end the contract. This is
called rescission and is a discretionary remedy available the courts. Rescission treats the contract as if it never existed.
False Statement
A statement is usually written/ verbal but does not have to be as in Spice Girls Ltd. Silence cannot be
a misrepresentation.
To be a misrepresentation the statement must be false. There is no obligation to make a statement
but what is said must be true. However there are exceptions to the rule where the D might be
obliged to make a statement.
Spice Girls Ltd v Aprilla
World Service BV (2000)
Fletcher v Krell (1873)
Exceptions to the
rule regarding
silence
Change of circumstances – if a statement is true but becomes false because of
a change in circumstances it can become a misrepresentation.
With v O’Flanagan (1936)
The making of a half truth – what is not said is a misrepresentation as the
person making the offer has a responsibility to tell the full situation
Dimmock v Hallett (1866)
Confidential relationship – where a relationship is based on trust there may be
a requirement to disclose all information.
Tate v Williamson (1866)
Lambert v Co-operative
Insurance Society (1975)
Of material fact
The misrepresentation must be of material fact – it must lead the person to enter into the contract
Statement of
opinion
A statement of opinion is not generally dishonest if the maker of the
statement believes it to be true. If the opinion proves to be false it will not
support a claim of misrepresentation. If the person who makes the statement
knows it to be untrue then this a statement of fact not opinion as in Smith v
Land and House Property Corp (1884)
Bisset v Wilkinson (1927)
Edgington v Fitzmaurice
(1885)
Smith v Land and House
Property Corp (1884)
Statement of
intention
A statement of intention/ to something in the future is not a statement of fact
unless there is evidence that the D had no intention to carry out the
statement/ knew it would not happen.
Edgington v Fitzmaurice
(1885)
Made by a party to
the contract
A person is not liable for the statements of others unless the third party is his/her agent. A newspaper review of an item cannot be
a misrepresentation.
That induces the
other party to
enter the contract
The statement must be a critical part of the decision making. The statement must have been relied on
and they must not have sought information elsewhere
Attwood v Small (1838)
It doesn’t matter if the C could have easily found the information elsewhere. The fact the statement
is untrue and D relied on it.
Redgrave v Hurd (1881)
Museprime Properties Ltd
v Adhill Properties Ltd
(1990)
Misrepresentations
– omissions in a
consumer contract
S.12 Consumer
Right Act 2015
includes information
that must be
included in a
contract to supply
goods
It is considered misleading if a trader
Omits material information that the average consumer needs, according to the context, to make
an informed transaction decision
Hides or provides material information in an unclear, unintelligible, ambiguous or untimely
manner
Fails to identify the commercial intent of the commercial practice if not already apparent from the
context
Different Types of Misrepresentation
Innocent
Misrepresentation
Misrepresentation Act 1967 defines innocent misrepresentation as a false statement made honestly. The person making the
statement needs to believe it to be true and there needs to be no evidence of negligence
Negligent
Misrepresentation
Common law of
negligence
Established in Hedley Byrne v Heller (1964) – refer to your notes on negligent misstatement
Misrepresentation
Act 1967
S.2(1) creates a statutory liability for negligent misrepresentation. There does not need to be a special
relationship between the parties. All that is needed is for there to be a contract and for C to suffer loss.
Once the C has proved there was a misrepresentation it is up to D to prove the belief was reasonably held.
Howard Marine v Ogden and Sons (1978)
Fraudulent
Misrepresentation
Origins in the Tort of Deceit, this covers situations where the person making the statement knows it
to be untrue or is reckless as to whether or not it is untrue. To avoid being found liable for fraudulent
misrepresentation the person making the statement must believe it to be true. An over optimistic
statement can also be a fraudulent misrepresentation.
Derry v Peak (1889)
Cherrilow Ltd v Butler
Creagh (2011)
Greenridge Luton One Ltd
v Kempton Investments
Ltd (2016)
Remedies
Innocent
Misrepresentation
Rescission or Damages – not both
Rescission will not apply when
Restitution to the original pre-contract position is not possible
Clarke v Dickson (1858)
The contract is affirmed – where the innocent person decides to carry on with
the contract even though they are aware of the misrepresentation
Long v Lloyd (1958)
Delay
Leaf v International
Galleries (1950)
A third party has gained rights over the property
Lewis v Avery (1972)
Negligent
Misrepresentation
Rescission and/or damages
Royscott Trust Ltd v
Rogerson (1991)
Fraudulent
Misrepresentation
Rescission and damages in the Tort of Deceit. The aim of damages is to put
the C in the position they would have been in before the misrepresentation
took place.
Smith New Court v
Scrimgoer Vickers (1996)
East v Maurer (1991)
Damages and
Misrepresentation
Although the normal
remedy is rescission
damages can be
awarded in some
circumstances
Misrepresentation Act 1967 – s.2(1) gives a right to damages for negligent misrepresentation
Misrepresentation Act 1967 – s.2(2) gives a court the discretion to make an
award for damages in lieu of rescission for a negligent or innocent
misrepresentation. This could be in addition to damages under s.291)
The damages must be for losses specifically related to the misrepresentation
Sindall v Cambridgeshire
County Council 1993
Damages in the Tort of Deceit where there is fraudulent misrepresentation.
