GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL Chapter 22 Misrepresentation

GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL Already looked at when “representations” may become terms of a contract Now have to look, in a wider sense, at the effect on contracts of misrepresentation in the tortious sense.

GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL A representation is a statement of a material fact (or sometimes an opinion) made by one party to another during negotiations intended to and actually inducing the other to enter into the contract. If it is false, it is a misrepresentation

GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL It has to be a statement. But sometimes silence can be a statement in certain circumstances. This is usually rare but can occur in three ways.

GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL First, if there is a failure to inform of changed circumstances this can count. So, in With v O’Flanagan (1936) a doctor stated in negotiation that his practice pulled in £2,000 a year, but failed later to inform the potential purchaser when he later got sick, this dropped to £5!

GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL Second, if the contact requires utmost good faith disclosure, silence can be a misrepresentation (such as insurance contracts).

GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL Third, a half-truth can be misrepresentation such as putting beauty board up to hide damp. In Nottingham Patent Brick and Tile Co v Butler (1886) a solicitor said he was not aware of any restrictive covenants affecting a particular piece of land. He didn’t say he had just not read the title documents and this counted as a misrepresentation!

GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL Usually need a statement of fact Opinion can count if person making it is in the best position to form an opinion –Esso Petroleum v Marsden Oil Co rep told propspective garage owner about expected sales levels of a location Actionable – represented that this was being done with skill and care in calculating the figure Had he said it was a guess, would be different.

GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL Bissett v Wilkinson –Rep that land would take 2000 sheep –Not actionable –Made it clear was his opinion only –Pr aware Vr had no special knowledge or skill

GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL Statements of Intention Can a statement of future intention be a statement? Edington v Fitzmaurice (addition) –Prospectus stated its object of issuing debentures was to complete alterations to buildings. –Not true – D claimed this was only a statement of intention, not of fact and only the intention was not carried out –CA rejected – Bowen LJ “A misrepresentation as to the state of a man’s mind is…a misstatement of fact”

GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL The Seaflower (addition) Owners of ship said they would obtain approval of a particular oil company within 60 days. Charterers of ship claimed this a misrep – should have known (or did know) they wouldn’t get the approval. Ct held that this was just a statement of intention, not fact…

GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL Must INDUCE party to enter the K so if you don’t rely on it, no claim. –Attwood v Small – statement about potential of mine wrong, but buyer had commissioned his own survey…

GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL The Kinds of Misrepresentation An innocent misrepresentation is one that is neither negligent nor fraudulent. A fraudulent misrepresentation is one that is made knowing it is false or made recklessly as to whether it is true or false. Can get damages in tort in deceit A negligent misrepresentation is one made without reasonable grounds for the belief. Can get damages on Hedley Byrne

GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL Consequences - Recission May be able to set aside contract for misrep – purely discretionary as equitable When can you rescind for misrep? It depends on whether the misrep is innocent or fraudulent/negligent.

GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL If Innocent Contract must not yet have been executed Legge v Croker –Sale of land – said no public right of way – wrong –Emerged after sale completed – therefore contract executed – could not rescind –Sale of Goods Act, 1980 limits this rule – s.44…. This rule does not apply if misrep is not innocent – but the rest of the rules apply even if it is innocent….

GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL If Fraudulent or Negligent Don’t have the rule that cannot operate if contract executed… Affirmation –Learn of the misrep, and proceed on – taken to have affirmed the K –Re Hop and Malt Exchange and Warehouse Co Bought shares – misleading prospectus – learned of it – continued to deal with shares – taken to hav treated K as subsisting

GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL Delay –Leaf v International Galleries Innocent misrep about artist and painting Sought rescission 5 years later – lapse of time made it inequitable to rescind –May be different if F or N Misrep O’Kelly v Glenny –Solicitor lied about value of estate – heiress sold it –10 years later – sued for R – had transaction set aside

GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL Effect on Third Parties –If it would effect a bona fide third party who purchased for full value? –White v Garden D sold iron to A – A resold to P – A paid by forged bill of exchange – D seized iron in P’s possession Clear F misrep – rescind K? No…effect of recission would have been to deny P the ownership of goods it got in good faith and for full value

GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL If not possible If it is impossible to restore parties to original position – wont get R Vigers v Pike –Subject was a mine – Rec sought when the mine was fully worked out. –Could not be restored to pre-K positions.

GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL Recision and the SOGASOSA, 1980 Rule – innocent mispre gives no right to recission where contract executed –S.44, 1980 – K for sale of letting or HP of goods or services – can sue on innocent misrep for recission even though K has been performed. –You need to show the misrep was a term of the K though – i.e. Oscar Chess etc. –Quite limited – court may allow K to subsist and order payment of monies etc

GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL Misrep and Disclosure The idea here is that in some cases silence (i.e. failing to say something) can amount to a misrep – which may entitle one to recission. Simple logic – you don’t say something, your silence intimates that the “something” doesn’t exist

GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL Silence can be misrep if the K is one which required uberrimae fides – duty to disclose in such cases Insurance is the big deal here Principle – insurer knows nothing, insured knows everything…should disclose it all If you don’t, Ins can avoid K – pay back premia Rule set out in Carter v Boehm – all material facts to be disclosed Sometimes statute intervenes