⇒ Misrepresentation is complex:
⇒ For there to be actionable misrepresentation:
⇒ 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’
⇒ 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
⇒ The statement MUST be unambiguous
⇒ 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):
⇒ Misrepresentations can also be made by actions and/or conduct:
⇒ In general, you cannot have misrepresentation by silence (Keates v The Earl of Cadogan (1851)). However, there may be exceptions to this general rule:
⇒ 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:
⇒ 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?
⇒ Misrepresentation does not automatically enable rescission → the contract becomes voidable not void
⇒ 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
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⇒ 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
⇒ Negligent misstatement is similar to negligent misrepresentation but there needs to be a ‘duty of care’ between the parties to rely on negligent misstatement
⇒ 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
⇒ This allows court to award damages in lieu (instead) of rescission in non-fraudulent misrepresentation cases
⇒ 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?
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