A misrepresentation is a false statement of fact or law which induces the other party to

enter into contract

Unambiguous​:

● The statement must be unambiguous,clear, not mere puff.

Dimmock v Hallett​, where the land was described as improvable. This statement was
held as ambiguous and thus does not amount to actionable misrepresentation

The more specific a statement, the less likely it will be treated as mere puff. (​Carlil v
Carbolic Smoke Ball​)

False​:

● Where a statement becomes false after being made as a result of change of

circumstances, keeping silent about the change may amount to
misrepresentation, (​Spice girl’s v Aprilia​)
● Half Truths also amount to actionable misrepresentation. (​Dimmock v Hallett​)

Statement​:

● There is no general duty to disclose information. (​Keates v Earl of Cadogan​)

● A statement can also be made by conduct (​Spice girls​)

Fact​:

● A statement of opinion is not generally a misrepresentation (​Bisset v Wilkinson​)

Exceptions​:

Where a statement of opinion is made by a person who is in the better position to know
the truth, that can amount to an actionable misrepresentation (​Smith v Land & House
Property Corporation​).

Where the person giving the statement has special skill and knowledge about the
relevant subject in hand, their opinion would amount to actionable misrepresentation.
(​Esso Petroleum Ltd v Mardon)

A statement of intention is not misrepresentation. A person who fails to carry out his
stated intention does not thereby make a misrepresentation. However ​Eddington v
Fitzmaurice (1885) p ​ rovides the authority that if a person makes a statement of future
intention that is false at the time he makes it, then he has made a false statement of
fact. This also applies to statements about an opinion that is not in fact held.

Inducement

There must be an actual inducement in order to be there a misrepresentation. If a

reasonable person would have been induced then it would be sufficient. ​(Muse Prime v
Adhill Properties)

The statement only has to be an inducement, not the inducement. ​It is enough that it was an
inducement that was actively present in the representee’s mind. ​Eddington v
Fitzaurice

There are three situations where the representation would not induce the claimant to
enter into a contract.

1) The claimant needs to be aware of misrepresentation.

If the claimant is unaware of misrepresentation that would not be considered as an

inducement. (​Horsfall v Thomas​).

2) ​ The claimant must be affected by the misrepresentation

Where the claimant did not allow the misrepresentation to affect his judgment that would
not be considered as inducement. (​Smith v Chadwick​) ​A company prospectus
contained a statement that a certain important person was on the board of directors.
The statement was false. The plaintiff admitted that his judgement had not been
influenced by this statement. It was held that the plaintiff could not avoid the contract on
the ground of misrepresentation as he had not been influenced by the misstatement.

​3) ​The representee must rely on the misrepresentation

Where he relies on his own or a third party judgment that would not be considered
inducement. (​Attwood v Small​)

​4) ​The claimant need to know that the representation was true

Where the claimant knew that the representation was untrue that would not be
considered misrepresentation.

​5) ​The representation must be addressed to the claimant

Where it is addressed to someone other than the claimant that would not be considered
as inducement. ​(Peek v. Gurney)

If the claimant had the opportunity to verify the truth of the statement, and he did not
take the opportunity to verify it, the claim for misrepresentation would still be valid.
(​Redgrave v Hurd​). However in (​Smith v Eric Bush)​ it was held that​ Redgrave v Hurd
will not apply where it was reasonable to expect the claimant to make the use of the
opportunity to verify the truth of the statement and he fails to do so.

Burden of proof is on the claimant to prove that reasonable person would be induced.
This can be rebutted. The misrepresentor can say, yes, the reasonable person would
have been induced by that statement but you actually weren't, as in ​JEB Fasteners v
Marks Bloom.

Once inducement has been proved then the burden of proof shifts on the representator
to prove that the representee did not rely on his statement, at the time of entering into
the contract. ​(Museprime v. Adhill)

Types of misrepresentation

Fraudulent misrepresentation

A fraudulent misrepresentation was defined in ​Derry V Peek​ as a false statement which

is ‘made knowingly, or without belief in its truth, or recklessly, careless whether it be true
or false’.​ Thomas Witter Ltd v TBP Industries ​provides authority that if the maker of
the statement has no idea whether it is true or false, this statement would be fraudulent
due to the recklessly asserting it is true when it may not be​. The problem of bringing a
claim under fraudulent misrepresentation is that the burden of proof is on the claimant to
show that the defendant was fraudulent. It is a very high burden of proof, more the
balance of probabilities. ​(Derry v Peek​).

Damages

Damages may be recoverable under the tortious action of deceit. This would put the
claimant in a position he had been had the misrepresentation not been made. The
plaintiff can recover for all direct loss incurred as a result of the fraudulent
misrepresentation- regardless of foreseeability (​Doyle v Obly)​.

The aim is tortious and therefore the only profit recoverable would be the profit that the
representee would have made had the representation not been made at all (and
had this contract not been entered into), rather than the profit based on the
representation being true ​(East v Maurer)
The claimant should be very cautious when making a claim under fraudulent misrep as
there is a higher standard of proof due to the serious allegations. There may also be
penalties in the event the claim is not made out.

Negligent misrepresentation at common

There needs to be Special relationship between parties, giving rise to a duty of care.
The defendant needs to be aware of the reliance ​ (​Hydley Byrne v Heller)​. Caparo v
Dickman established that, in order to be liable, the misrepresentor must have known, or
ought to have known, the reasons for which the advice was being sought. A special
relationship will normally exist in relationships between professional persons,
particularly if the profession involves giving advice to clients, e.g. solicitors, barristers,
agents. However, following ​Esso Petroleum Co Ltd v Mardon​ it is clear that a special
relationship will also exist in commercial transactions where the representor has greater
knowledge and experience than the representee and where it is reasonable to expect
the representee to rely upon the statements.

Existence of special relationship and duty of care + Breach of duty of care and
foreseeable loss = Negligent misrepresentation

Negligent misrepresentation under S 2(1)

Negligent misrepresentation under S 2(1) of the Misrepresentation Act 1967. Where a

misrepresentation has been made by one contracting party to another the party making
the misrepresentation is liable to damages unless he can prove that he has reasonable
grounds to believe and did believe up to the time the contract was made that his
statement was true. There is no requirement to establish a special
relationship(​Gosling v Anderson) ​The burden upon the defendant is a heavy one and
not easy to discharge (​Howard Marine v Ogden).

Damages

Under Section 2(1) of the Misrepresentation Act, the representee would get the same
amount of damages as we would get in fraudulent misrepresentation. Therefore, the
representor would be for all consequential losses as a result of the statement
(Royscott v Rogerson)​. There is no requirement of foreseeability ​(East v Maurer)

Innocent Misrepresentation

An innocent Misrepresentation exists where the false statement is honestly made with
having a reasonable ground in believing in its truthfulness ​nevertheless turns out to be
false​ representor. Under s.2(2) ​Misrepresentation Act 1967​ the remedies for an
innocent misrep are rescission ​or​ damages in lieu of rescission. The claimant cannot
claim both.

The effect of misrepresentation is to render a contract voidable. A contract will remain in

force until the representee takes action to set it aside. The representee may rescind by
informing the other party that he no longer intends to be bound by the contract. Under
this action, the representee must not delay with rescission or he may be deemed to
have affirmed the contract. If the representor cannot be contacted, the representee can
rescind by informing another third- party authoritative source ​(Car and Universal
Finance v Caldwell).

Acquisition of third- party rights

Provided that rescission takes place before the goods have been passed to a third
party, then a claim in rescission will be upheld and goods must be returned . If the
goods have to the third party before the rescission of the agreement, then the third party
would have acquired the title of the goods and rescission will be barred.

Timing of rescission is of significant importance. If rescission is effected before a third

party acquires rights, it will prevent any rights being acquired. Also where the
representor cannot be traced, rescission will be affected when the representee openly
makes his intention to rescind clear, i.e. in cases of fraud – notifying the police. Car and
Universal Finance Co Ltd v Caldwell

Damages in lieu of rescission

The right of rescission is sometimes lost where the court exercises its discretion under s
2(2) of the Misrepresentation Act 1967 to award damages in lieu of rescission. The
discretion of the court is never exercised in cases of fraudulent misrepresentation. The
discretion is used where the effects of the misrepresentation are insignificant and the
court considers that damages will provide a satisfactory remedy. The discretion can be
used in innocent misrepresentation in appropriate cases where the award of damages
in not usually available, but cannot be exercised where a claim to rescission has been
barred

Damages for innocent misrepresentation

Damages cannot be recovered for innocent misrepresentation. As mentioned above,
the court can exercise its discretion and award damages in lieu of rescission under s
2(2) of the Misrepresentation Act 1967 where rescission would be available.

Indemnity

Whilst damages cannot be awarded for an innocent misrepresentation, an indemnity

can be granted to allow the recovery of any expenses incurred by the representee, as a
result of entering into the contract

Fraudulent misrepresentation (Tort of deceit)

Characteristics​:

A statement made:

Knowingly

without belief in its truth,

or recklessly

Defence:

An honest belief that the statement is true

Remedies​:

Damages – tort of deceit

All losses flowing from the fraud

Rescission

Negligent misrepresentation

Characteristics​:

Negligent misstatement

Special relationship

giving rise to a duty of care

Defendant aware of reliance

Characteristics​:

S 2(1) Misrepresentation Act

Negligent statement

Defence​:

An honest belief that the statement is true

Innocent misrepresentation

Characteristics:

An untrue statement that is neither fraudulent or negligent

Remedies:

No right to damages

Damages in lieu of rescission may be awarded under s 2(2) Misrepresentation Act 1967

Indemnity

Rescission