#16124 - Misrepresentation - Contract Law

I - Requirements of Misrepresentation 3

A – Representation and Terms 4

1/ Remedial significance of the distinction 4

2/ Criteria for the distinction 4

a/ Based on the intention of the parties as objectively manifested by their words and conduct 4

b/ The more important the statement to the representee, the more likely it is a term. 4

c/ More likely a term if D has special knowledge or skill in the subject matter, or in a better position to ascertain the accuracy 4

*Dick Bentley v Harold Smith [1965] 1 WLR 623 5

*Oscar Chess v Williams [1957] 1 WLR 370 5

d/ Unlikely to be a term if the maker requests C to verify 5

e/ Unlikely to be a term if the maker merely passes on false information initiated by another 5

f/ Parole evidence rule (if there is a document, then it is presumed to contain the complete terms) 5

Heilbut Symons v Buckleton [1913] AC 30 5

B – The actionable statement 5

1/ Statements of fact or law 6

2/ Statements of intention 6

*Edgington v Fitzmaurice (1885) 29 Ch D 459 6

3/ Statements of opinion 6

Bisset v Wilkinson [1927] AC 177 6

4/ Mere puffs 6

5/ Silence 6

a/ Extending the catchment of actionable misrepresentation 7

With v O’Flanagan [1936] Ch 575 7

b/ Exceptions based on special relationships imposing a duty to disclose 7

c/ Indirect techniques for giving relief 7

C – Made to the claimant 7

D – Inducement 8

*Redgrave v Hurd (1881) 20 Ch D 1 8

*Hayward v Zurich Insurance [2016] UKSC 48 esp. at [18] - [19], [58] - [72] 8

E – Materiality 8

F – Consumers 9

*Consumer Rights Act 2015 ss 11 & 12 (goods contracts); s.50 (services contracts) referring to the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (SI 2013/3134) (on which see esp. regs 5, 9, 10 and 13; Scheds 1 and 2). 9

II – Remedies for misrepresentation 9

II.A - Rescission for Misrepresentation 10

A – Effects of rescission 10

Whittington v Seale-Hayne (1900) 82 LT 49 10

B – Timing of rescission 11

*Car and Universal Finance v Caldwell [1965] 1 QB 525 11

C – Bars to rescission 11

1/ Incorporation as term no longer a bar to rescission 11

2/ Affirmation 11

3/ Lapse of time 12

Leaf v International Galleries [1950] 2 KB 86 12

4/ Third party rights 12

5/ Impossibility of mutual restitution 12

6/ Inequity (s2(2) MA) 12

*Sindall plc v Cambridgeshire CC [1994] 3 All ER 932 12

II.B - Damages for Misrepresentation 12

A – Common Law Fraudulent misrepresentation (deceit) 12

1/ Requirements 13

*Derry v Peek (1889) 14 App Cas 337 13

2/ Measure of damages 13

Doyle v Olby [1969] 2 QB 158 13

*Smith New Court v Scrimgeour Vickers [1997] AC 254 13

East v Maurer [1991] 1 WLR 461 13

B – Common law Negligent misrepresentation (under tort of negligence) 14

*Hedley Byrne v Heller [1964] AC 465 14

Esso Petroleum v Mardon [1976] QB 801 14

A – Damages under the Misrepresentation Act 1967 14

*Misrepresentation Act 1967, s.2(1) as amended by The Consumer Protection (Amendment) Regulations 2014 SI 2014/870 reg. 5 (on these Regulations generally, see below) 15

Salt v Stratstone Specialist Ltd [2015] EWCA Civ 745 15

D – No liability for (purely) innocent misrepresentations 16

II.C – Damages in lieu of rescission (s2(2)) 16

A/ Measure of damages 16

B/ Availability of damages 16

II.D – Other Monetary Remedies 16

IV - Exclusion of Liability for Misrepresentation 16

A – Construction 16

B – Statutory Controls 17

*Misrepresentation Act 1967, s.3 (as amended by the Consumer Rights Act 2015 s.75 Sched. 4 para.1) 17

1/ Scope of s3 17

*JP Morgan v Springwell [2010] EWCA Civ 121, paras 127-187 (Aikens LJ) 17

AXA Sun Life Services v Campbell Martin [2011] EWCA Civ 133 17

2/ Reasonableness under s3 17

VI - Consumer “Rights to redress” 17

*Consumer Protection from Unfair Trading Regulations 2008 reg. 5 (misleading practices) and Part 4A (the latter inserted by The Consumer Protection (Amendment) Regulations 2014 SI 2014/870 reg.3). 17

For rescission:

• An unambiguous false statement of existing fact

• Made to C

• Which induces C to enter the contract

For damages, the above, plus:

• Requisite state of mind (not an honest misrepresentation on reasonable grounds)

1/ Remedial significance of the distinction

• If it is a term that is breached, the innocent party can claim damages aimed at putting him in the position if contract had been performed or specific performance or termination if breach is sufficiently serious.

• If it is an actionable representation then the innocent party can rescind and/or claim damages aimed at putting him in the position if not contracted.

Sometimes C can show that it is both a misrepresentation and a term (s1(a) Misrepresentation Act¹) so can rely on either set of remedies – C may prefer misrepresentation if:

• C cannot meet the threshold for termination (serious breach) but can for rescission (any misrepresentation)

• C made a bad bargain so would prefer for damages to “go backwards”, though s2(2) allows the courts to deny rescission for equitable considerations

2/ Criteria for the distinction

a/ Based on the intention of the parties as objectively manifested by their words and conduct

Authorities: Heilbut, Oscar Chess.

But usually the parties son’t intend anything… so…

b/ The more important the statement to the representee, the more likely it is a term.

In Bannerman v White the statement that goods didn’t have sulphur made after the buyer said that he wouldn’t even bother asking for the price if it did have sulpher was a term.

c/ More likely a term if D has special knowledge or skill in the subject matter, or in a better position to ascertain the accuracy

*Dick Bentley v Harold Smith [1965] 1 WLR 623

• Facts: a car dealer made a false statement to a private buyer about the mileage of the car. It was a term because the dealer was “in a position to know, or at least find out the history of the car”, and thus stated a fact that should be within his own knowledge.

*Oscar Chess v Williams [1957] 1 WLR 370

• Facts: a private seller misstated the model of a car he was selling to a car dealer, relying on the car’s log book which had been altered by the previous owner. Held that it was a representation not a term because the car dealer was in at least as good a position to discover the car’s true age as the private seller.

d/ Unlikely to be a term if the maker requests C to verify

In Ecay v Godfrey no term because the seller stated that the boat was sound but said the buyer should have it surveyed anyway.

e/ Unlikely to be a term if the maker merely passes on false information initiated by another

Lord Denning (Routledge v McKay) – if a chain of sellers each sells the same car and passes on misstatements based on a log book altered by the first seller, each subsequent seller is only an innocent passer-on and so it would not be a term.

f/ Parole evidence rule (if there is a document, then it is presumed to contain the complete terms)

Heilbut Symons v Buckleton [1913] AC 30

• A document is presumed to contain the complete terms and everything not contained therein is a representation.

However, courts may find a statement outside the document to be a collateral term or collateral contract.

1/ Statements of fact or law

To be actionable, it has to be an unambiguous, false statement of existing fact or law, which may be:

• Express statement of fact and law²

• Statements of intention/opinion/puffs are not prima facie included, but courts can find they contain implied statements of fact

• Silence may be actionable if there is a duty to disclose

Statements can be by words or conduct:

• Walters v Morgan:

  • Simple reticence is not actionable but

  • A nod or a wink, or shake of the head, or smile intended to induce the other party to believe the existence of a non-existing fact is actionable

2/ Statements of intention

Statements of intention are actionable if:

• They are terms

• They are dishonest (because statements of intention always have an implied statement of fact, the fact being that the statement reflects the maker’s state of mind. If honest, no misrepresentation because D is allowed to change his mind, but if dishonest, then there is a misstatement of fact):

*Edgington v Fitzmaurice (1885) 29 Ch D 459

• Facts: a company director issued a prospectus inviting subscriptions, which said that it was raising oney to develop the business though in fact the money was used to repay existing company debts.

• Held (Denman J): liable for deceit because “the state of a man’s mind is as much a fact as the state of his digestion”. Misrepresentation as to the state of a man’s mind is a misstatement of fact.

3/ Statements of opinion

Not actionable per se but actionable if:

• They are a contractual term (if D has superior knowledge and experience, then it might be a contractual term to the effect that care and skill had been exercised in giving the opinion), but breach of such a term confers no remedial advantage above misrepresentation (in that damages are to compensate C for lack of skill and care in making the statement)

• Dishonest (misstatement of fact regarding the state of D’s opinion)

• Lack of reasonable ground (if the representor is in a better position to know the truth, the court may imply a statement of the fact that the representor has reasonable ground for their opinion), but only if D has superior knowledge:

Bisset v Wilkinson [1927] AC 177

• Facts: the vendor of a farm told the prospective buyer that he thought the land could carry 2000 sheep. Both parties knew the land was untried as a sheep farm, so were in the same position to...