#19864 - Misrepresentation Pq Notes - Contract Law

If there is an inaccurate misrepresentation C relied on in entering the contract, C can rescind (Redgrave v Hurd). It is no defence that C should have checked the misrepresentation’s accuracy (Redgrave v Hurd).

Remedy = Rescission, Sometimes Damages Too

Fraudulent Misrepresentation Tort of Deceit Damages
Negligent Misrepresentation at Common Law (Tort of Negligent Misstatement) Damages
Negligent Misrepresentation under s.2(1) MA 1967 Damages
Innocent Misrepresentation Discretionary Damages Instead of Rescission under s.2(2)
Representation is Collateral Warranty/Assurance Breach Regular Damages

If the statement is a term, it becomes a collateral warranty. It is essentially term of the collateral contract (City & Westminster Properties v Mudd).

The test is whether the parties objectively intended that statement give rise to a collateral contract (Heilbut, Symons v Buckleton). As such, entire agreement clauses prevent any collateral contract: AXA v Campbell Martin.

If a statement is a term rather than representation, go to incorporation breach remedies.

Whether a statement is a term will depend on the following:

1. Importance. The more important the representation to C, provided he told D this, this more likely it is a term (Bannerman v White). Therefore, if C would not have contracted without the statement, it is very likely a term: Couchman v Hill.

2. Relative Knowledge. The more likely D is to know what he’s talking about in relation to C, the more likely it’s a term. Thus, in Oscar Chess v Williams, an amateur car owner was held not to have intended to warrant anything about the car’s model when making statements to a car dealer. The reverse was true in Dick Bentley v Harold Smith, where a car dealer was held to have warranted a car’s mileage as the dealer was much better placed to know or find out details about the car.

3. Independent Verification. If D has suggested C verify the truth of the statement, it is likely a representation (Ecay v Godfrey). Note D does not have to demand that C do this, but in that case D merely suggested. This negates any intention to warrant. Where D has told C there is no need to verify his statement, this is likely a term: Schwawel v Reade.

1. Pre-formation False Statement or Representation by Conduct, which was

2. Apt to Mislead, and which

3. the Representee

4. Relied

The statement or conduct must be, before formation, (a) inaccurate. It can be (b) verbal or by conduct. (c) Representation must have been prior to formation.

An accurate statement is not a misrepresentation: Sykes v Taylor-Rose. Additionally, an inaccurate statement is not actionable if only trivially false (substantially correct) such that it would not influence a reasonable person in the context of all the representations made: Rix J in Avon Insurance v Swire Fraser.

Half-truths can be misrepresentations (Lord Cairns LC in Peek v Gurney). As per Mustill LJ in Atlantic Estates v Ezekiel, the test is whether the true importance of the representation is distorted by what is unsaid, so even if the representation is literally true, it is misleading as it might lead C to deduce something false.

There is also implied misrepresentation, based on something implicit states, conduct, or both. As per Longmore LJ in Deutsche Bank v Unitech Global, this is highly fact-specific.

In principle, conduct like nods, winks, shaking the head, and smiling are enough (Lord Campbell LC in Walters v Morgan). Spice Girls v Aprilia is an example of misrepresentation by conduct – the representations by conduct suggested the Spice Girls weren’t about to lose a member. Aprilia signed a sponsorship for them to promote their scooters – they had 5 colours for the different members. One left, meaning the sponsorship was commercially infeasible. CA found misrepresentation.

Misrepresentation by conduct can also be fraudulent, as it was in Gordon v Selico where a property seller covered up dry rot and then tried to claim the buyer’s surveyor had failed to detect the concealment.

The representation is treated as continuous until formation. Therefore, someone who innocently makes a misrepresentation then discovers it is wrong may be fraudulent unless they tell the representee: Lord Reed in Cramaso v Ogilvie-Grant. This also means where the initially false statement is no longer false by formation, there is no action unless the representee has already relied on that statement before it became true.

Where an accurate statement becomes inaccurate before formation, this is enough. In With v O’Flanagan, D stated truly a doctor’s practice was worth 2,000 a year. By the time of formation is was much lower. D knew this but failed to tell C. The non-disclosure amounted to misrepresentation. C must be aware the statement is now untrue. Lord Wright MR did not think C must be aware, but he was in the minority. The majority, lead by Romer LJ, thought awareness was needed. The majority was approved by Lewison J in Foodco v Henry Boot.

As a preliminary, the statement must be about a past/present fact, or an aspect of law (Briggs v Gleeds for law).

The test is whether (a) a reasonable person, having the characteristics of the representee, (b) in the context, would have acted reasonably in (c) treating a representation as intended to be relied on, and as the solid basis for decision-making. The test is thus objective: MCI WorldCom v Primus Telecommunications. It applies to both express and implied representations (IFE Fund v Goldman Sachs).

A statement will not be apt to mislead if it is vague and ambiguous, or mere puff. In Dimmock v Hallett, Turner LJ held a statement that the land is fertile and improvable was a ‘flourishing description’ rather than proper representation. Because the test is objective, taking into account characteristics, commercial parties are less likely to be influenced (Christopher Clarke LJ in Raiffeisen Zentralbank v RBS).

For fraudulent misrepresentation, D must intend C understand his statement in the way in which it was false: Morritt LJ in Goose v Wilson Sandford. There must be intention.

Because of this test, statements which are incredible or obviously wrong are not apt to mislead. Proudman J seemed to hold otherwise in Shaftsbury House v Lee, suggesting a statement that property prices would not fall in any circumstances was not mere puff. Andrews thinks this dictum is wrong. It goes against the objective test.

A representation by D to C1 will continue to operate prior to formation if, in that time, C2 rather than C1 becomes party to the contract: Cramaso v Ogilvie-Grant. It does not matter if it is the representee’s agent to whom the misrepresentation is communicated: Strover v Harrington per Browne-Wilkinson J.

The representee must rely on the statement by entering the contract.

There can be reliance even though the representee could have checked the validity of the representation: Redgrave v Hurd. However, this will not apply where the representee’s experience is considerable. In Peekay Intermark v Australia and New Zealand Banking, an experienced investor merely glanced at the terms and conditions of the investment after a non-fraudulent misrepresentation. Chadwick LJ emphasised C had badly cut corners by neglecting to read the terms, for he knew this alone defined the investment.

There is also reliance where C had already decided to contract but agrees to enter it on less favourable terms because of a misrepresentation: Clef Aquitaine v Laporte Materials.

In terms of causation, you generally need but-for (Smith v Kay) unless the misrepresentation was fraudulent. However, the misrepresentation need not be the sole inducement – it is enough it was one of the factors, without which C would not have contracted or on the same terms (Edgington v Fitzmaurice).

If the statement is ‘material’, reliance on it can be inferred (Smith v Chadwick). It will be material if it is apt to induce reliance by a reasonable person. If the statement was material, the representor has to displace the inference of reliance. He can do this one of three ways:

1. The representation did not reach the mind, or attention, of C

2. C, although aware of the representation, did not allow it to influence their decision, preferring to conduct their own investigation

3. D delivered and C received a correction – it is not enough here if C does not notice the correction (Assicurazioni Generali v Arab Insurance)

For fraudulent misrepresentation reliance is presumed provided C was aware of the statement and did not deliberately choose to ignore it: County Natwest v Barton. Reliance is presumed here even if shown C would have contracted absent the misrepresentation: Barton v Armstrong. It is sufficient C knew of the statement and it formed a part of his decision to contract, even if strictly not satisfying but-for: Barton v Armstrong. A fraudulent misrepresentation can still be actionable if C was not entirely persuaded by the lie, but still acted in reliance: Zurich Insurance v Hayward.

C is not entitled to rely on matter of opinion. Statements that an anchorage was safe and that a piece of land could support 2,000 sheep were opinions (Anderson v Pacific Fire; Bissett v Wilkinson) because the representor, as the...