Cases of Misrepresentation

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