MISREPRESENTATION

Topics Included:
- Misrepresentation
- Statements of Law
- Statements of Opinion
- Statements of Future Intentions
- Not Misrepresentation
- False Advertisements
- Silence
- Exceptions to Silence
- Half Truth
- True Statement becomes Untrue
- Better Position
- Untrue Statement Intended
- Contract can be Avoided
- No Influence
- No Reliance
- Types of Misrepresentation
- Fraudulent Misrepresentation
- Innocent Misrepresentation
- Negligent Misrepresentation
- Remedies for Misrepresentation
- Damages
- Recession

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Cases Discussed:
Case #1: ST. MARYLBONE PROPERTY CO. LTD. v PAYNE
Case #2: BISSET v WILKINSON
Case #3: SMITH v LAND & HOUSE PROPERTY CORP.
Case #4: EDGINGTON v FITZMAURICE
Case #5: NOTTINGHAM PATENT BRICK & TILES CO. v BUTLER
Case #6: WITH v O'FLANAGAN
Case #7: SMITH v CHADWICK
Case #8: ATTWOOD v SMALL
Case #9: REDGRAVE v HURD
Case #10: DERRY v PEEK

- Misrepresentation:
• A misrepresentation is an untrue statement of fact made by
one contracting party to another which is intended to induce
and does not induce the other party to enter into a contract.
• When this can be established it makes the contract voidable
at the instance of the person who has been misled. He/she can
rescind or cancel the contract.
• The definition of misrepresentation given above can be
broken down as follows; a misrepresentation is an untrue
statement of fact. This does not necessarily mean that it must
be in words.
• In St. MARYLEBONE PROPERTY CO. LTD. v PAYNE, the
"statement of fact" was infact a photograph.

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- Statements of Law:
• The following are not misrepresentation statement of law,
statement of opinion and statement of future intentions.
• Statements of law, which everyone is presumed to know.

- Statements of Opinion:
• In BISSET v WILKINSON, the seller of land said that it would
support 2000 sheep, but that he had never used it for that
purpose. This statement proved to be untrue later on, and was
held to be a statement of opinion.
• However, if the "opinion" is one that could not honestly be
held it will be misrepresentation to express it.
• In SMITH v LAND & HOUSE PROPERTY CORP., it was held to be
misrepresentation for the seller to describe a sitting tenant as
"most desirable" when actually the tenant was behiind with his
rent and on the verge of bankruptcy.

- Statements of Future Intentions:

• Such statements are also not misrepresentations.
• However it is misrepresentation to say you intend to do
something if you have no intention of doing it.
• In EDGINGTON v FITZMAURICE, it was misrepresentation for
the doctors of a company to say that money lent to the
company would be used to extend the business when in fact
they intended to use it to pay off debts.

- Not Misrepresentations:

- False Advertisements:
• False advertisements & sales talk are not misrepresentation
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unless they claim to be based on facts and figures.

- Silence:
• Silence does not normally amount to misrepresentation.
• It is an important principle of English Law that neither party
has any obligation to disclose facts that might affect the
contract unless the other party asks.

- Exceptions to Silence:
• There are some exceptional situations where a contracting
party is obliged to disclose facts that are known to him but not
to the other party even if he's not asked.

- Half Truth:
• Such as when one party has told the half truth in
NOTTINGHAM PATENT BRICK & TILE CO. v BUTLER. A solicitor
told a prospective purchaser that he was not aware of any
restrictive covenants affecting the land he was selling, but did
not go on to add that this was because he had not bothered to
check the facts. The court found that this was a
misrepresentation.

- True Statement becomes Untrue:

• If a statement which is true which is true when it is made
becomes untrue before the contract is finally settled. This must
be discussed.
• In WITH v O'FLANAGAN the defendant was a doctor who was
selling his practice. In January when the parties were
negotiating the contract he told the plaintiff that the practice
was worth £2000 a year. This was true at the time but by the
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time the contract was finally signed in May and income had
fallen to £5 per week (£250). It was held that the defendent's
failure to inform the plaintiff of the drop in his income was a
misrepresentation, and the contract could be avoided.

- Better Position:
• Certain contracts are exceptional. In which one person is in a
much better position than the other to know certain material
facts, and the law therefore imposes on him a duty to reveal
facts that might influence the other party.

- Untrue Statement Intended:

• The untrue statement must be intended to induce and
actually induce the person to whom it is made, to enter into
contract.

- Contract can be Avoided:

• There is no misrepresentation if the plaintiff did not know
about the false statement for e.g. if the untrue statement was
put in a report but the person it was intended for failed to read
it. This happened in ReNorthumberland & Durham Banking Co.

- No Influence:
• There is no misrepresentation if a false statement was made
but it did not influence the other party to enter the contract.
• In SMITH v CHADWICK a company falsely claimed that a
certain erson was a director of the company since Smith
admitted that he had never heard of this person, he could not
prove that the statement persuaded him to buy shares in the
company and so could avoid the contract on those grounds.
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- No Reliance:
• If a false statement was made but the other person did not
rely on it because he checked the facts for himself. If someone
does check a statement and decides that it is true, there is no
misrepresentation.
• In the case of ATWOOD v SMALL he doesn't bother to check,
he can sue for misrepresentation if the statement is untrue.
• In the case of REDGRAVE v HURD the plaintiff succeeded in
proving misrepresentation when he chose to believe when the
defendant told him rather than checking the documents. The
defendant offered him, which would have shown the statement
to be untrue.

- Types of Misrepresentation:
• There are three types of misrepresentation fraudulent,
innocent and negligent.

- Fraudulent Misrepresentation:
• A misrepresentation is fraudulent if a false statement is made
knowing it to be false, not believing it to be true or recklessly,
not caring whether it is true or false.
• The definition was laid down in the case of DERRY v PEEK, in
which a tramway company stated that in their prospectus that
they had permission to use steam instead of horse power.
When infact they had applied for such permission but had not
recieved it yet. They had honestly thought that permission was
just a formality. The House of Lords found that their
misrepresentation was not fraudulent because their honest
belief that they had not acted dishonestly or recklessly.
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- Innocent Misrepresentation:
• An innocent misrepresentation is a false statement made by
someone who had reasonable grounds for believing it to be
true when he made it.

- Negligent Misrepresentation:
• This type was introduced by the Misrepresentation Act 1967,
Section 2 (1). It is defined as a false statement made by
someone who had no reasonable grounds for believing it to be
true when he made it.

- Remedies:
• There are two basic remedies for misrepresentation damages
and recession.

- Recession:
• This means that the contract will be set aside; that is
cancelled as if it had never been.
• It is available for all kinds of misrepresentatio but not for
common law negligence.

- Damages:
• It is money compensation for loss and is available for all types
of misrepresentation and also for common law negligence.
• For fraudulent and negligent misrepresentation, damages are
available as well as recession, whereas for innocent
misrepresentation they are available instead of recession.

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