Misrepresentation cases

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Barclays Bank v O’Brien [1994] 1 AC 180

Facts: The husband used misrepresentation to make wife enter contract with the bank. The bank should have been aware of the misrepresentation in the given situation and should have advised her to seek legal advise, but the bank did not do this

Held: The contract was not enforceable based on the misrepresentation of the 3rd party (the husband)

Bisset v Wilkinson [1927] AC 177

Facts: The claimant wanted land for his sheep, so asked a farmer selling some land how much sheep the land could hold. The farmer had not had sheep on the land but guessed it could hold 2000 sheep. Subsequently, the claimant bought the land, but turned out to be wrong about the number of sheep the land could hold so he claimed misrepresentation

Held: The Privy Council held that the claimant could not claim there was misrepresentation because the farmer had made a statement of opinion

Clarke v Dickson (1858) EB & E 148

Facts: Clarke (the claimant) was made to buy shares in a company by the defendant as a result of misrepresentation. The company got into financial difficulty, leading the claimant to discover the defendant had made a false statement to make him get shares. The claimant bought an action to recover his money. The court considered whether it was possible to get money back when his shares were now worthless.

Held: Crompton J said “if you are fraudulently induced to buy a cake you may return it and get back the price; but you cannot both eat the cake and return your cake”. So, the share buyer could not rescind the contract

Derry v Peek (1889) UKHL 1

Facts: The plaintiff (i.e. claimant) bought shares in a tram company after its prospectus stated that they would use steam power instead of the traditional horse power (this was evolutionary!). The company assumed they would be allowed to use steam power, but turned out permission to use steam powered trams was refused. The plaintiff wanted damages for tort of deceit as the prospectus had not given the truthful facts.

Held: The House of Lords said with deceit there needs to be fraud, but the tram company had not been fraudulent because they reasonably expected to be allowed to use steam. Lord Herschell said that a fraudulent misrepresentation must have been known to be untrue, or made recklessly as to whether the statement was true or not

Doyle v Olby [1969] 2 QB 158

Facts: Doyle bought business from the defendant because of the profitability he was told he would get. However, Doyle lost money.

Held: The court said Mr Doyle was entitled to the price he paid for the business as well as any losses incurred. The party that misrepresented the claimant is liable for any missed opportunities the claimant would have had

Edgington v Fitzmaurice (1885) 29 Ch D 459

Facts: Edgington bought shares in Fitzmaurice’s company. The prospectus (of Fitzmaurice's company) said that they were selling shares so the company could expand, but they were actually not doing very well and needed money to pay off the debts.

Held: Edgington could claim misrepresentation because Fitzmaurice's intention was not what he said it was

Esso Petroleum Co ltd v Mardon [1976] QB 801

Facts: Mardon was buying a petrol station from Esso. Esso predicted that the petrol station would sell 200,000 gallons of petrol annually. BUT, they overlooked the fact that the petrol station would not have direct access from main road. Mardon bought station, but sales were lower than expected

Held: Esso had made a statement of fact (as they were in a position of expertise) so there was misrepresentation

Gordon v Selico Ltd (1986) 278 EG 53

Facts: Selico owned a flat and it was not in a good condition. Selico painted over the rot inside the house to hide it. A person bought the flat believing it to be okay, but said there had been misrepresentation when discovering the truth.

Held: The court said that the painting over the rot was an unequivocal statement of fact; so there was misrepresentation by the act of painting<

Hedley Byrne & Co Ltd v Heller & Partners Ltd (1964) AC 465

Facts: Hedley was an advertising company and they did some advertising for Easy Power. Easy Power had not paid Hedley for a previous contract, so did not want to enter into another contract without being paid. They asked the bank to give a report on the financial standing of Easy Power to see whether they could enter into another contract. The bank replied in writing giving a good report, but “without liability”: the bank showed Easy Power had enough money for “ordinary business proceedings”. Easy Power subsequently went into liquidation and did not pay, so Hedley sued the bank.

Held: There was no liability because of the exclusion clause bank had put, but without this the court said the bank was liable for negligent misstatements causing economic loss because they owe a duty of care. So the tort of negligence was being extended to situations where there is negligent misstatement causing pure economic loss

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CONTENT

Howard Marine v Ogden (1978) QB 574

Facts: Ogden had to hire some barges to get rid of some clay. They needed the barges to hold a certain amount of clay so they asked the plaintiff (i.e. claimant) what volume the barges would hold so they could calculate how many days they needed to hire the barges for. They said it could hold 1600 tons but turns out this was not accurate and could only hold about 1055 tons. It took them a lot longer and lost money so sued for negligent misrepresentation, but Howard Marine argued that they reasonably believed what they said was true because of what was said in Lloyd’s register

Held: The House of Lords were not convinced because Howard Marine had registration documents saying the exact capacity of the barges without referring to the register. So this was negligent misrepresentation

Leaf v International Galleries [1950] 2 KB 86

Facts: The claimant bought a painting from the defendant, and they both believed it was done by a famous artist. 5 years later it was found it was not done by any famous painter, so the claimant bought an action of misrepresentation

Held: The claim for innocent misrepresentation succeeded, BUT the claimant could not rescind the contract due to lapse of time

McInerny v Lloyd’s Bank Ltd [1974] 1 Lloyd's Rep. 246

Facts: A third party wanted to purchase McInerny’s company. Lloyd’s contacted McInerny which was ambiguous as to whether Lloyd’s had or had not accepted the third party’s instruction to guarantee the promissory note

Held: Ambiguous statements are not actionable in cases of misrepresentation

Phillips v Brooks [1919] 2 KB 243

Facts: Philips was a jeweler and was conned by someone pretending to be someone else to sell him a ring worth lots of money. The person was pretending to be sir Bullogh and he had a cheque book matching sir Bullogh as it was stolen. Philips sold the ring on the strength that he thought he was selling it to Sir Bullow and not this rogue. When Philips tried to cash the cheque in, it bounced. Philips sued brooks in the tort of convergence

Held: Contract was not void because the court presume that if they contract face to face that is who they intend to deal with. So the defendant acquired rights of the ring and rescission could not occur

Royscot Trust v Rogerson (1991) 2 QB 297

Facts: Rogerson wanted a car and one company agreed to sell a car, and Rogerson paid £1200 deposit for it. To pay for the rest of the car he wanted financial help from Royscot Trust. The car company made the application form for the car misrepresenting the price of the deposit and car. Had the figures been correctly stated Royscot would not have given financial help, due to company policy. Royscot suffered a loss when Rogerson was unable to pay off his instalments

Held: The Court of Appeal held the Misrepresentation Act said damages are to be tortious, not contractual

Smith v Land and House Property Corp (1884) 28 Ch D 7

Facts: The claimant bought a hotel after a seller described one of the tenants living there as ‘most desirable’. However, the seller knew the tenant had not paid rent as he was verging on bankruptcy

Held: There had been misrepresentation because the seller knew the true facts

Whittington v Seale-Hayne (1900) 82 LT 49

Facts: A landlord leased his farm which he said was in good sanitary condition. But it was not and Whittington's chickens died. The lease required the tenant to make any repairs to the farm which would make it up to the council’s standards – the tenant had a lot of repairs to make due to the bad quality condition of the farm. Whittington (tenant) wanted to rescind the contract and indemnity for loss of his chickens, profit and medical expenses.

Held: Whittington could claim indemnity for repairs of the farm, but most the other things fell under damages (Indemnity is very limited)

With v O’Flanagan (1936) Ch 575

Facts: The defendant was selling his medical practice, which he said received around £2000/yr. This was true but circumstances had arisen which led to a significant decrease in income. The claimant wanted the contract rescinded

Held: The Court of Appeal held that there had been misrepresentation because the defendant had not told the claimant of the change

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