Advanced Contract & Tort Misrepresentation:

A false statement of existing or past fact, made to the claimant, inducing them to enter the contract. Representation / Term distinction: o Heilbut, Symons Co [1913] objective intention(s) of the parties. o Importance of the statement made Bannerman v White [1861]. o Did the statement maker have superior knowledge or skill, in comparison to the other? Oscar Chess v Williams [1957] [held as a misrepresentation]; Dick Bentley [1965 [held as a term]. Must be a statement of fact: o Can include a statement of law Brennan v Bolt Burden [2004]. o A statement of opinion (subjective view) does not equate to a statement of fact (Bisset v Wilkinson [1927]). Exception: where there is superior knowledge. Smith v Land and House Property Corp [1884] A statement of opinion by one who knows the facts best, involves very often a statement of material fact (Bowen LJ). Esso Petroleum v Mardon [1976] realistic for Esso to have superior knowledge. A statement of future intention is not a statement of fact, unless the representor was dishonest, for example in Edgington v Fitzmaurice [1885]. Silence is not a representation. There is no general duty of disclosure (Keates v Cadogan [1851]). Keates emphasises caveat emptor (buyer beware, the claimants should have checked). Further example, Sykes v Taylor-Rose [2004]. Per Lord Ackner Walford v Miles [1992] A duty to negotiate in good faith is unworkable in practice and inherently repugnant. Half-truths (representations which only reveal part of the picture). If you begin to say something [positively], there is a duty to finish the whole story. Dimmock v Hallett [1866]. A statement of fact is deemed to be continuing (With v OFlanagan [1936]). A change in circumstance making a statement untrue must be communicated. This duty is triggered by the original statement. Reaffirmed Fitzroy Robinson Ltd v Mentmore Towers Ltd [2009]. Contracts of utmost good faith (uberrimae fidei) also require disclosure of material facts. In contracts of insurance, the insured has a duty to disclose all facts regarded as reasonable: (Pan Atlantic Insurance v Pine Top Insurance [1995]).

Addressed to the claimant, and induced them to enter: o Reliance on the statement must have induced the contract. Although it need not be the sole inducement (Edgington v Fitzmaurice [1885]). o Redgrave v Hurd [1881] If the claimant is given the opportunity to verify the representations accuracy, and does not, then the misrepresentation remains active. You still have a good claim. Smith v Bush [1990] 90% of the market would rely on the surveyors report, even though it is for the building society. However, if commercial /industrial premises, may not take the same view. Thus, Redgrave the general rule, but there may be exceptions to that. The misrepresentation will not have induced the contract if the claimant is unaffected by the representation because he relies on other information (Atwood v Small [1863]).

A misrepresentation will not have induced the contract if the claimant is unaware of the representation (Horsfall v Thomas [1862]). Museprime Properties Ltd v Adhill Properties Ltd [1991] Reliance is assessed by an objective reasonable person test, and the burden is on the representor to prove lack of reliance.

Types of Misrepresentation: 1. Fraudulent Misrepresentation: Derry v Peek [1889] HL A statement is fraudulent if made: o Knowingly, or o Without belief in its truth, or o Recklessly careless as to whether it be true or false. [Acting unreasonably is not enough]. 2. Common Law Negligent Misrepresentation: Hedley Byrne v Heller [1964] HL o In certain circumstances, damages may be recoverable in tort for negligent misstatement causing financial loss. o Liability depends on a duty of care arising from a special relationship. o Also need reasonable reliance on the statement, by the claimants. Esso v Mardon [1976] CA o Special relationship can arise in a purely commercial relationship. o Representor has special knowledge; reasonably foreseeable that the representee will rely on it. Chaudhry v Prabhakar [1989] Assumption of responsibility extended here to social situations. 3. Statutory Negligent Misrepresentation: Misrepresentation Act 1967 o Reverses the burden of proof designed to help claimants. o Burden on the defendant contains firstly an objective test; secondly a subjective test. o Defendant can only satisfy the onus on him, if both components are satisfied. o NB: Must enter into a contract with the person who is making the misrepresentation. Howard Marine v Ogden & Sons [1978] CA o Howard Marine didnt satisfy the first requirement (reasonable grounds to believe). Why use a secondary source (Lloyds register); when a primary source is available (ships documents). 4. Innocent Misrepresentation: o Wholly innocent misrepresentation if it is not fraudulent or negligent.

Remedies for Misrepresentation: 1. Rescission: o Rescission makes a contract voidable (valid until set aside) remember it is an equitable remedy. o Aims to restore parties to their original position. o Rescission terminates the contract if so requested. o To rescind, I must inform the other party. Only valid when the other contracted party is informed
Car and Universal Finance [1964] Communication to the authorities (AA or Police) is sufficient. Affirmation: Long & Lloyd [1958] once affirmed, you are not able later to rescind the contract. Lapse of time: But courts very reluctant to apply this against people who have been defrauded. But if neg or innocent, then five years (as in Leaf v International Galleries [1950]) is too long.

Impossibility of restitution: Normally, if you cannot return what you received, then rescission is not possible. But remember this is equity. Clarke v Dickson [1858]; White v Garden [1851]. Court will make some concessions for minor usage, but if wholesale change, not possible. Third party rights (Car and Universal Finance, 1964). If a third party acquires rights prior to rescission, then they may get rights blocking your claim. One cannot rescind if this is the case. 2. Damages: o Compensating the claimant for loss incurred by entering the contract. Fraudulent Misrepresentation: - tortious measure (back in the position as if tort had not occurred). Doyle v Olby [1969] test for remoteness is that all losses directly flowing from the fraudulent statement are recoverable. East v Maurer [1991] Damages were awarded for the profit the claimant might have made had he bought a different salon in the same areas (recover for the opportunity cost). o Reaffirmed in 4Eng Ltd v Harper [2007] damages reflecting lost capital value & profits. Clef Aquitaine Sarl [2001] can recover for the loss of opportunity, due to the fraud, to enter into a more profitable transaction. Hedley Byrne esque: - Wagon Mound remoteness test were these losses reasonably foreseeable? Statutory Negligent Misrepresentation: Damages may be claimed under section 2(1) 1967. Royscott v Rogerson [1991] The remoteness test under section 2(1) is the remoteness test for fraud, not Wagon Mound. (cf: doubts expressed in Smith New Court Securities, 1997). o Controversial as the remoteness rule for fraud can produce very high levels of damages, for what is essentially negligent, not fraud. Section 1 Law Reform (Contributory Negligence Act) 1945. o Applicable to common law negligent mis-statement o Not applicable to damages for fraud (Alliance and Leicester Building Society [1994]). o Gran Gelato [1992] contributory negligence can bite in a s2(1) situation, despite stating in the statute made fraudulently.

Innocent Misrepresentation: No damages as such for innocent. The only remedies are rescission, and indemnity. But: s2(2) 1967 Act damages in lieu of rescission. Court has discretionary power to do this. However, only applicable where representee is entitled to rescission, and not barred from it. William Sindall [1994] damages given, where rescission clearly the wrong remedy. Are consequential losses available for innocent misrepresentation? This is unclear. Chitty suggests a special measure to compensate the injured party for loosing the right to rescind Thomas Witter Ltd [1996] If you have had a right to rescind at some point, then damages ok. Zanzibar v British Aerospace [2000] Opposite view, damages instead of rescission. Clearly if rescission is gone, then you should not recover. Indemnity: on rescission, the representee can recover any costs incurred in discharging legal obligations necessitated by the contract. Indemnities compensate for any additional costs and liabilities directly imposed by the contract. Newbigging v Adam [1887].

Remember: section 3 must satisfy the requirement of reasonableness in section 11(1) UCTA 1977. Such clauses are invalid, unless the representor can establish their reasonableness.

Cremdean Properties [1977] clauses seeking to negate one of the requirements of an actionable misrepresentation are brought under section 3. Watford Electronics Ltd [2001] if a clause stating no statements made by either party have been relied upon by the other in agreeing to enter the contract may prevent a representee from establishing inducement by a misrepresentation, if the representor can prove that he actually believed the representee did not rely on his statement. Section 2 UCTA controls exemptions of negligence liability (including neg misrepresentations).