⇒ Misrepresentation is complex:

• It mixes common law, statutes and equity
• It is a different action from breach of contract BUT the same facts may give rise to liability for both
• Closely related to mistake BUT there is a distinct legal responses

⇒ For there to be actionable misrepresentation:

1. There must have been an unambiguous false statement
2. The false statement must have been of law or fact
3. The false statement must lead the other party to enter the contract

⇒ So there must have been a false representation (i.e. a misrepresentation): Behn v Burness (1863) states that ‘a representation is a statement, or assertion, made by one party to the other, before or at the time of the contract, of some matter or circumstance relating to it’

• An objective assessment is taken in distinguishing between a representation and a fact (i.e. in distinguishing between there being a misrepresentation or a breach of contract)/
• BUT, s 1(a) Misrepresentation Act 1967 makes it clear that the distinction between a representation and a term does not really matter anymore: even if a misrepresentation becomes a term in the contract, the right to claim misrepresentation is not lost

⇒ For there to be a misrepresentation one party must have made an unambiguous false statement to the other party

⇒ If the false statement is made by a third party this will not affect the contract

• However, see the exception to this in Barclays Bank v O’Brien [1994] where the contract was not enforceable based on the misrepresentation of a 3rd party (the husband)

⇒ The statement MUST be unambiguous

• The case of McInerny v Lloyd’s Bank Ltd [1974] showed that ambiguous statements are not actionable

⇒ Only statements of past or present: Mellish LJ in Beattie v Lord Ebury (1872) said that a statement that ‘something will be done in the future cannot either be true or false at the time it is made’

⇒ Must be a statement of fact or law, not an opinion: see, for example, Bisset v Wilkinson [1927]

⇒ It can be a statement of fact and law: Pankhania v Hackney LBC [at 57]

⇒ There are some exceptions to the general rule that a statement of opinion is not actionable (i.e. where opinion can be regarded as fact):

• a) Where the opinion given by X contradicts the true facts he (X) already knows (so X knows his opinion he is giving is not true) e.g. Smith v Land and House Property Corp (1884)
• b) Expert opinion can be treated as statement of fact e.g. Esso Petroleum Co ltd v Mardon [1976]
• c) An opinion which is not usually had can be treated as a false statement of fact e.g. Edgington v Fitzmaurice (1885)

⇒ Misrepresentations can also be made by actions and/or conduct:

• Walters v Morgan (1861) Campbell LJ: ‘a nod or a wink, or a shake of the head, or a smile… which might influence the price of the subject to be sold’ can amount to misrepresentation
• Also see the case of Gordon v Selico Ltd (1986), where there was misrepresentation by the act of painting

⇒ In general, you cannot have misrepresentation by silence (Keates v The Earl of Cadogan (1851)). However, there may be exceptions to this general rule:

• a) Only half the facts are given e.g. Dimmock v Hallett (1866)
• b) A true statement made originally, but when circumstances change and these changes are not disclosed to the other party e.g. With v O’Flanagan (1936)
• c) Where there is good faith and the parties must disclose all relevant facts (contracts uberrimae fidei) e.g. in Insurance contracts

⇒ 1) The representation must have been material to the decision to enter into the contract

⇒ 2) The representation must have actually been relied upon by the representee

⇒ If the party would have entered into the contract anyway (without the false statement of fact or law) then there is no misrepresentation: JEB Fasteners Ltd v Bloom [1983]. However:

• Although misrepresentation must lead other party to enter the contract it need not be only reason the other party did so
• It does not matter if the party that is being misrepresented missed an opportunity to discover the truth

⇒ Rescision for misrepresentation

⇒ Damages

⇒ Damages under section 2(2) Misrepresentation Act 1967

⇒ This used to be the main remedy for misrepresentation, however over the years compensation has become a much wider used remedy, but rescission is still widely available

⇒ Rescission means to put the contract aside and put the parties in the position they were originally in

⇒ When does rescission become unavailable?

• Affirmation i.e. where the parties continues with a contract even after they know/discover the statement was false e.g. Long v Lloyd [1958]
• Lapse of time i.e. a party may not be able to rescind the contract if too much time has gone by since the misrepresentation was made e.g. Leaf v International Galleries [1950]
• Impossibility of restitution i.e. rescission only possible if ‘he can return what he has received’. So where a good had been consumer or destroyed restitution is impossible e.g. Clarke v Dickson (1858)
• Adverse effect on third parties i.e. if goods are obtained by misrepresentation, which are then sold on to a third party, the court will not expect the third party to give the goods back e.g. Phillips v Brooks [1919]

⇒ Misrepresentation does not automatically enable rescission → the contract becomes voidable not void

• The innocent party decides if they wish to rescind the contract, if not then the contract remains enforceable
• The innocent party must notify that they wish the contract to be rescinded e.g. Reese Silver Mining v Smith (1869)
• What if the other party cannot be notified (e.g. if lost contact)? Car and Universal Finance v Caldwell [1965] shows that in such a situation you do not necessarily have to contact the other party directly (the claimant contacted the police and the Automobile Association)

⇒ In common law, damages were once only given for fraudulent misrepresentation (tort of deceit). The main case on deceit is Derry v Peek (1889)

⇒ NOW, negligent misstatements (tort of negligence) can now give rise to damages being allocated (Hedley Byrne v Heller and partners [1964])

⇒ Damages are awarded by determining what position the parties would have been in if the false representation had not been made

• This does not necessarily involve placing the parties into the parties’ original position before the misrepresentation, but may also take account of missed beneficial opportunities as a result of the misrepresentation e.g. Doyle v Olby [1969]
• So all actual losses the claimant suffers, even if NOT foreseeable (i.e. remoteness of damages rule does not apply), the defendant will be liable for!

⇒ Fraudulent misrepresentation (tort of deceit)

⇒ Negligent Misrepresentation

⇒ Innocent misrepresentation

⇒ Behn v Burness (1863) defines fraudulent misrepresentation as follows: “either by reason of its being made with a knowledge of its untruth, or by reason of its being made dishonestly, with a reckless ignorance whether it was true or untrue.”

⇒ In Derry v Peek (1889), Lord Herschell further refined the definition of fraudulent misrepresentation into 3 important factors: ‘a false representation made knowingly, or without belief in its truth, or recklessly, without caring whether it be true or false”.

⇒ Negligent misrepresentation is a false statement made without reasonable ground for belief in its truth. This differs from common law negligent misstatement (see below)

⇒ Negligent misrepresentation is enacted by Misrepresentation Act 1967, s 2(1)

⇒ It seems odd to call it negligent misrepresentation because the claimant is never proving the defendant's negligence

⇒ The burden of proof on representor (i.e. the person making the representation) to establish honest belief that their statement was made reasonably

⇒ See the case of Howard Marine v Ogden (1978)

⇒ This category is almost redundant

⇒ Prior to 1967, any misrepresentat that wasn't fraudulent would be deemed as Innocent misrepresentation, but this has now changed and innocent misrepresentation has been considerably reduced

⇒ Innocent misrepresentation is now defined as a situation where the misrepresentor had a reasonable belief his misstatement was true

⇒ A negligent misstatement is a claim which is brought at common law in tort

• See the case of Hedley Byrne & Co Ltd v Heller & Partners Ltd (1964)

⇒ Negligent misstatement is similar to negligent misrepresentation but there needs to be a ‘duty of care’ between the parties to rely on negligent misstatement

• BUT, occasionally there only needs to be proof that the other party would rely on the false statement (Anns v Merton London Borough Council [1978])

⇒ The current position on when you can claim negligent misstatement is as follows: the harm must be foreseeable and the parties must have ‘sufficient proximity’ (introduced in Caparo Industries v Dickman [1990])

⇒ However, negligent misstatement has not been used as much since the Misrepresentation Act 1967 because a remedy for non-fraudulent misrepresentation can be made under the act

⇒ In common law you could claim indemnity for any expenses instead of rescinding the contract e.g. Whittington v Seale-Hayne (1900)

⇒ Today, indemnity is only really sought where the contract is being rescinded by no intentional fault of the misrepresentor

⇒ s2(1) Misrepresentation act says that the same remedies are available for fraudulent and negligent misrepresentation

⇒ Once it is proved there was a false statement the burden of proof is on the defendant to show that he/she had reasonable grounds to believe what they said was true (reverse burden of proof) – if the defenant is unable to do so then damages will be awarded for negligent misrepresentation even though the claimant only has a very low burden of proof, who must only show there is an actionable misrepresentation (this is sometimes known as “fiction of fraud”)

⇒ The question is whether damages should be contractual or tortious

• Contractual damages would seek to compensate the innocent party
• Tortious damages would seek to put the claimant into the position he/she would have been in had the misrepresentation not been made
• Watts v Spence [1976] made it appear it was contractual, but the Court of Appeal in Sharneyford v Edge [1987] said it should be tortious
• Royscot Trust v Rogerson (1991) also considered this issue. The court held that the Misrepresentation Act said damages are to be tortious, not contractual

⇒ This allows court to award damages in lieu (instead) of rescission in non-fraudulent misrepresentation cases

• It was therefore seen by some people that damages was a remedy lost if the right to rescission was also lost e.g. through lapse of time, affirmation, impossibility and third party rights (p94)
• Thomas Witter v TBP Industries [1996] did not accept this view - said damages can still be awarded even if the availability of rescission has been lost
• Floods of Queensferry v Shand Construction [2000] and Government of Zanzibar v British Aerospace [2000] did not follow the view in Thomas Witter

⇒ William Sindall v Cambridgeshire County Council [1994] said obiter that the amount of damages awarded under s2(2) should be less than under s1(1)

⇒ The general rule, under s. 3 of Misrepresentation Act 1967 (amended by S. 8 of UCTA 1977), says that you cannot exclude any liability for misrepresentation

⇒ When is it possible to exclude liability for misrepresentation?

• When there is an exclusion clauses that is reasonable
• Where there is no representation or no reliance clauses, if it is reasonable: Springwell Navigation Corporation v JP Morgan
• Where there is an entire-agreement clause, if reasonable