Misrepresentation in Contract Law: Types, Elements, and Remedies, Lecture notes of Law

Download Misrepresentation in Contract Law: Types, Elements, and Remedies and more Lecture notes Law in PDF only on Docsity! JUS5260 Spring 2013 – Misrepresentation Overview A. What = representation?  A statement which induces entry into a contract but which is not part – i.e., a term – of the contract. B. What = misrepresentation?  An untrue statement of fact made by one party to the other which was intended to and did induce the latter to enter into the contract. C. What = result in case of misrepresentation?  A contract entered into as result of misrepresentation is voidable. D. What = remedy in case of misrepresentation?  Rescission.  Damages in tort or under the Misrepresentation Act 1967 may also be available (see below). NB. No requirement of precontractual “good faith” English law traditionally does not recognize any doctrine of precontractual good faith: see, e.g., Walford v. Myles [1992] 2 AC 128 per House of Lords. However, some signs of greater judicial readiness to recognize such a doctrine have emerged in recent years (see, e.g., Philips Electronique Grand Publique SA v. British Sky Broadcasting Ltd. [1995] EMLR 472), partic. under influence of EU legislation. For further discussion, see, e.g., R. Brownsword, Contract Law: Themes for the Twenty-First Century (OUP, 2006, 2 nd ed.), chapter 6; E. McKendrick, Contract Law (OUP, 2008, 3 rd ed.), chapter 15. Elements of misrepresentation A. Untrue statement of fact  Test of falsity = whether statement is “substantially correct” – see Avon Insurance plc. v. Swire Fraser Ltd. (2000) per Rix J.  The notion of “statement” can extend to mere conduct without words. See, e.g., Spice Girls v. Aprilia World Service B.V. (2002).  The following are not untrue statements of fact: (i) a “mere puff” or “sales patter” – see, e.g., Dimmock v. Hallett (1866) (ii) statements of intention, unless at the time of stating the intention the party did not actually have such an intention – see, e.g., Edgington v. Fitzmaurice (1885) (iii) statements of opinion, unless the maker of the statement did not actually hold the opinion or had no reasonable grounds on which to base the opinion – see, e.g., Bisset v. Wilkinson (1927); Smith v. Land & House Property Corp. (1884); Humming Bird Motors Ltd. v. Hobbs (1986) 2 (iv) representations of law in the abstract, unless made dishonestly or without reasonable basis. However, if representation really deals with application of law to particular facts so that it is a statement about the effect of the law in a particular situation, it can be actionable as misrepresentation – see, e.g., Pankhania v. London Borough of Hackney (2002) (v) silence (see below). Disclosure duty?  No duty to disclose facts which if known would affect the other party’s decision to enter into the contract – see, e.g., Keates v. The Earl of Cadogan (1851); Turner v. Green (1895); Bell v. Lever Bros. Ltd. (1932)  However, silence will amount to misrepresentation in four situations: (i) half-truths – if a party makes a statement which is in fact true they may still be guilty of misrepresentation by what is left unsaid: see, e.g., Dimmock v. Hallett (1866); (ii) change of circumstances – if a statement, which was true at the time it was first made, becomes (due to change of circumstances) no longer true (prior to the contract being made), then party who made statement has a duty to inform the other party about the change: see With v. O’Flanagan (1936); cf. uncertainty regarding change of intention – compare Wales v. Wadham (1977) with Inclusive Technology v. Williamson (2009); (iii) contracts “uberrimae fidei” (of the utmost good faith) – e.g., insurance contracts, which require that persons applying for insurance must disclose all facts that would influence the insurer in deciding whether to accept the risk (iv) certain confidential or fiduciary relationships – e.g., solicitor and client, principal and agent, partners. B. Party to contract  Misrepresentation must be made by a party to the contract, though it can be made via a party’s agent. There is no remedy in contract law for a misrepresentation made by a non-party; there may be, however, a remedy in tort (see below). C. Inducement  To be actionable, the misrepresentation must influence a party in deciding whether or not to enter into the contract. The misrepresentation need not be sole inducement, just one of the inducements. See Edgington v. Fitzmaurice (1885) (above); if misrepresentation is fraudulent, rebuttable presumption that it induced contract: Dadourian Group International Inc. v. Simms (Damages) (2009).  Thus, misrepresentation is not actionable if representee: (i) never knew of its existence – Horsfall v. Thomas (1862) (ii) did not allow it to affect their judgement – Smith v. Chadwick (1884); Attwood v. Small (1838)