Misrepresentation - Law - Lecture Slides, Slides of Law

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Misrepresentation Docsity.com History • 1880’s – Caveat Emptor – Let the buyer beware • Court of Equity – Relief for fraudulent misrepresentation – Rescission was only remedy • Common Law Courts – Relief for innocent misrepresentation only if it became a term of the contract – Tort of negligent misrepresentation – Only remedy was damages Docsity.com Categories of Misrepresentation • Fraudulent misrepresentation – Representor knew it to be false or was reckless as to whether it was true or false Docsity.com Fraudulent misrepresentation (deceit) Step 1 A false representation of fact was made (beware promises, opinions or a mere puffery) Step 2 The representation was intended to (and did) induce the representee to act ; (eg, by creating a contract) Step 3 The false representation was fraudulent: the representor knew the statement was untrue, or was reckless as to its truth  Liability for fraud cannot be excluded  Remedy for fraudulent misrepresentation is damages. Docsity.com Categories of Misrepresentation • Negligent Misrepresentation – Representor owed a duty of care to representee – Representor failed to exercise the required standard of care – Loss, which was a reasonably foreseeable consequence of the misrepresentation, was caused by misrepresentation Docsity.com Categories of Misrepresentation • Misleading & Deceptive Conduct – Section 52 Trade Practices Act – No need for fraud or negligence Docsity.com Misleading or deceptive conduct (statutory misrepresentation) Is the representee covered by the TPA, ASIC Act and/or state legislation (eg FTA (Vic))? What remedies are appropriate under the relevant Act(s)? Has the representee committed ‘misleading or deceptive conduct’and was this ‘in trade or commerce’? • Prominent and clear disclaimers may affect liability. • Remedies: – Damages (if the misleading or deceptive conduct representation caused the loss); – Contract created in reliance on the misleading conduct may be varied or declared void; – Injunctions; – Other remedies (eg corrective advertising); – Criminal sanctions are available for misrepresentations under s 75AZC TPA. Docsity.com Elements of Misrepresentation • The statement was false • The statement was one of fact • Statement was addressed to the representee before or at the time that the contract was entered into • The statement induced the representee to enter into the contract Docsity.com Addressed to the Representee • A representee cannot sue on a representation that was not directed to him and was not intended to induce him into making the contract – Peek v Gurney (S&OR p41\61) • But is sufficient if communicated to a third party with the intention that it would be communicated to the representee Docsity.com Statement Induced Representee to Act • Not necessary that it was the only reason for entering the contract • But it must be one of the reasons • Representee cannot be aware of truth before entering into the contract – Holmes v Jones (S&OR p40\60) • Representee is not required to investigate – Redgrave v Hurd (S&OR p41\61) Docsity.com Remedies for Misrepresentation • Recission – Contract is void ab initio – Not the same as termination • Damages Docsity.com Duress (cont.) • Duress to the Person – Threats of physical punishment or imprisonment to the person, his family or friends • Duress to Goods – Threats that are made against a person’s property Docsity.com Economic duress • An economic threat that is not “legitimate” • No rule that that commercial parties have to be fair to one another • A threat to break a contract can be economic duress – North Ocean Shipping v Hyundai (p220\262) • A lawful threat may be illegitimate – Cockerill v Westpac (S&OR p220\263) Docsity.com Undue influence • The unconscionable use by one person of power possessed by him over another in order to induce the weaker party to enter into a contract – Mitchell v Pacific Dawn (S&OR p263) • Presumed in special relationships and where one party is in a position of dominance or confidence – O’Sullivan v Management Agency (S&OR p221\264) – Lloyd’s Bank v Bundy (S&OR p222\265) Docsity.com Unconscionable Conduct - Remedies • Originally, only rescission was available • s51AA Trade Practices Act and s7 Fair Trading Act permits damages – A corporation must not, in trade or commerce, engage in conduct that is unconscionable within the meaning of the unwritten law, from time to time, of the States and Territories. • S82 Trade Practices Act & s159 Fair Trading Act – A person who suffers loss or damage by conduct of another person … may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention. Docsity.com Mistake • A party cannot get out of a contract because they made a mistake • Exceptions: – Mistake due to other party’s misrepresentation, unconscionable conduct etc. – Common mistake – Unilateral mistake Docsity.com Mistake • Common mistake – Both parties make the same mistake • Unilateral Mistake – One party is mistaken as to a fact; and – Other party is aware of the mistake – Taylor v Johnson (S&O p223) Docsity.com Rescission is available for: • Misrepresentation • Unconscionable conduct • Duress • Undue influence • Mistake Docsity.com Rescission (cont.) • Innocent party must give notice of rescission to other party – Notice can be implied from conduct • Academy of Health & Fitness v Power (S&OR p218\260) Docsity.com Rescission (cont.) • Rescission is not permitted if the contract has been affirmed – After discovering misrepresentation, innocent party does any act which indicates that he is treating contract as still running – A delay in rescinding can amount to an affirmation Docsity.com