Misrepresentation

A statement is NOT a Misrepresentation when:

1. It is a false statement of opinion/mere puff. In the absence of fraud, there is no right to

rescind the contract. (Bisset v Wilkinson and Dimmock v Hallet)

2. Statements or promises as to future conduct or intention will not attract liability in

misrepresentation.
a) EXCEPTION - if the person knows that his promise, which has induced another to
enter into a contract, will not in fact be carried out – then he will be liable. In
other words, if a person wilfully lies about his intentions, he may be guilty of
fraudulent misrepresentation of fact – Edgington v Fitzmaurice and Esso
Petroleum v Mardon.

3. Silence (Caveat emptor) Silence is generally not a misrepresentation.

a. Hands v Simpson Fawcett - the principle that the buyer alone is responsible for
checking the quality and suitability of goods before a purchase is made..
b. Sykes v Taylor-Rose – a seller was asked if there was anything the buyer had the
right to know was held not to be liable in misrepresentation.
c. Smith v Hughes - The claimant had purchased a quantity of what he thought was
old oats having been shown a sample. In fact the oats were new oats. The
claimant wanted the oats for horse feed and new oats were of no use to him. The
seller was aware of the mistake of the claimant but said nothing. The claimant
brought an action against the seller based on mistake and misrepresentation. It
was Held: both actions failed. The action based on misrepresentation failed as
you cannot have silence as a misrepresentation. The defendant had not mislead
the claimant to believe they were old oats. The action based on mistake failed as
the mistake was not as to the fundamental terms of the contract but only a mistake
as to quality.

EXCEPTIONS

Misrepresentation by conduct - a single word, a nod, wink, a shake of head, or a smile

may amount to a misrepresentation. (Walkers v Morgan)

Half Truths – when the representor only tells part of the truth, this may be
regarded as a misrepresentation – Nottingham Brick and Tile Co v Butler – buyer
asked seller’s solicitor if there were restrictive covenants on the land, the solicitor
said he didn’t know of any – the truth was he didn’t bother to read the relevant
document. HELD: even though the statement was literally true, it was a
misrepresentation – there were restrictive covenants – contract rescinded.

Statement which becomes false/change of circumstances – statement was true,

but becomes false due to change of circumstances – With v O’Flanagan and Spice
Girls v Aprilia.
 Contracts of the utmost good faith: imposes a duty of disclosure of all material
fact because one party is in a stronger position to know the truth – Lambert v
Cooperative Insurance.
NB: where there is a fiduciary relationship between the parties to a contract, a duty
of disclosure will arise e.g. Solicitor/Client; banker/Client; trustee/beneficiary etc.

NB: the term “statement” is not to be taken literally

- Painting over dry rot immediately before sale was a fraudulent

misrepresentation – Gordon v Selico Ltd.
- Arial shot of land with arrows misleadingly point to boundaries of land – St.
Marylebone Property v Payne
- In a relationship based on good faith, a duty of disclosure will arise – Conlon
and Another v Simms

An Actionable Misrepresentation

An unambiguous false statement of fact or law that induces a party to enter into a contract. This
renders the contract voidable

Unambiguous
The term must be sufficiently clear; in Dimmock v Hallet, the land was described as
“improvable” was held as ambiguous, therefore not actionable.
False – When a statement is true, but misleading – Dimmock v Hallet – statement made
that the land was let to paying tenant was true, but the tenants had given notice – this was
perhaps a half truth. In With v O’Flanagan and Spice Girls v Aprilia, the statement was
true when made, but change of circumstances caused them to be false.

False Statement /Conduct

Contracts of the utmost good faith: imposes a duty of disclosure of all material fact
because one party is in a stronger position to know the truth – Lambert v Cooperative
Insurance. There can also be misrepresentation by conduct - a single word, a nod, wink, a
shake of head, or a smile may amount to a misrepresentation. (Walkers v Morgan)

Fact or Law
In Smith v Land House Corporation, the landlord knew the tenant was behind on rent, yet
described the tenant as a “most desirable tenant”. The landlord’s statement was a
misrepresentation of fact.

Which Induces the contract

In order for the misrepresentation to actionable, it must induce the person to whom it is
addressed to make a contract. The statement must be one of the factors. It doesn’t need to
be the only reason, just a reason – Edgington v Fitzmaurice.
- Horsefall v Thomas – you can’t rely on a misprep if you didn’t know you were a
victim of misrepresentation.
- If you rely on your own checks and investigations, you can’t claim misrep –
Atwood v Small. Rule does not apply when the misrep was fraududent and the
misrpesentee was asked to check the accuracy of the statement Pearson v
Dublin.
- If there is an opportunity to check and you don’t check, the mispresentor is still
liable – Redgrave v Hurd.
- Materiality – it will induce a reasonable person to enter into the contract –
Museprime Properties v A D Hill.

Types of Misrepresentations
 Fraudulent
Maker of the statement knows and believes it is untrue and is reckless as to whether is true
or false – Derry v Peek.
 Statutory
If the claimant can prove there was a misrepresentation, bringing a claim under the Act
shifts the burden of proof to the misrepresentor to prove they had reasonable grounds to
believe that the statement made was true. Howard Marine and Dredgiing v A Ogden and
Sons and Foster v Action Aviation – misrepresentation was made negligently within the
meaning of S. 2 of the Misrepresentation Act.
 Negligence at Common Law
False statement made by a person who had no grounds for believing it be true. Where the
maker of the statement and the person relying on it enjoy a special relationship giving rise
to a duty of care under the principle of Hedley Bryne v Heller. Here burden of proof is on
the claimant.
 Innocent Misrepresentation
If the elements of the misrepresentation can be proven but the maker of the statement
genuinely believes it to be true, and does not act negligently in making it.

Remedies

Rescission – the principal common law remedy for misrepresentation. It is available for
innocent, negligent or fraudulent misrepresentation.
It is an equitable remedy – it must be sought, it is not automatic
Until it has taken place, the contract will continue to exist – misrepresentation makes the
contract voidable.

Limits/Bars to Rescission

- Affirmation of contract – injured party indicates an interest – expressly – to

continue - Long v Lloyd
 - Lapse of Time - If injured party does not take action to rescind in a reasonable
time, the right will be lost.

- Restitution in integrum impossible/Impossibility of restitution. – Vigers v Pike –

could not rescind too much mineral extracted since the date of the contract.
Clarke v Dickson

- Third Party Acquires Rights – where a third party acquires rights in the
property, in good faith, for a value, the misrepresentee will lose their right to
rescind. – Phillips v Brooks (under Mistake) NB: the right to rescind will be lost
if the court exercises discretion to award damages in lieu of rescission under S
2(2) of the Misrepresentation Act.

Indemnity
An order of rescission may be accompanied by ordering an indemnity. This is money
payment by the misrepresentor in respect of expenses created by complying with the
terms of the contract. – Whittington v Seal-Hayne - NB: This is different from damages.

Damages
Fraudulent Misrepresentation
 Injured party may claim damages for FM in the tort of deceit. The purpose of
damages is to restore the victim to the pre-misrepresentation position.
 NB: Should the injured party claim damages after being the victim of a misrep, a
TEST OF REMOTENESS does not apply: The injured party may recover for all direct
loss incurred regardless of foreseeability – Doyle v Olby Ironmongers.
 Damages may include loss opportunity cost – East v Maurer; also for distress –
Archer v Brown

Negligent Misrepresentation

 Injured party may elect to claim damages under Negligent Misrepresentation, the
test of remoteness, which applies, is that the injured party may only recover for
reasonably foreseeable loss. – Esso Petroleum v Mardon.

Damages under the Misrepresentation Act

 Alternatively injured party may claim damages under S. 2 (1) of the
Misrepresentation Act – THIS REVERSES THE BURDEN OF PROOF. Damages will be
assessed on the same basis as fraudulent misrepresentation – direct consequences.
– Royscott Trust Ltd v Rogerson.

Wholly Innocent Misrepresentation (Misrepresentation Act S. 2(2)

 Gives the court a discretion: the injured would be entitled to rescind, to award
damages in lieu of rescission Damages under S.2 (2) cannot be claimed, it can only
be awarded.
Statutory Negligence at Common Law
No need for a special relationship Need for a special relationship giving
rise to a duty of care
Burden of proof shifts to the Burden of proof is on the represntee –
representor he who alleges fraud must prove it.
Third Party cannot bring a claim under Third party can claim within the Hedley
the act. The representee must be a party Bryne principle.
to the contract.
Tort of deceit; not too remote; Damages is tort of negligence. They
have to go to a different.
Foreseeability does not apply; Foreseeability applies
Damages will be assessed on the same Damages covering what you would
basis as fraudulent misrepresentation – have lost due to non-performance –
ALL direct consequences or loss limited to this. .