Vitiating Factor: Factors, when present, render contract

Effect:
unenforceable. Usually present at start of contract Misrepresentation
2 types of remedies
Week 5: Misrepresentation Damages: To put the plaintiff in a position as if contract was never entered
into
Misrepresentation: A false representation of past or existing fact whicher and/or
materially induces innocent parry to enter into contrdact in reliance of it. Rescission: To set the contract aside from the beginning (ab initio)  The
Court rules misrepresentation: Places you in position you were b4 contract contract treated as if it never existed
Elements of
Effect: Contract is rendered voidable, NOT void Types of Misrepresentation
Misrepresentation
NOTE; In contrast to Breah of Contract: Places party in position AFTER
Representation must:
contract

Induce the Contract Arises under Tort ofMisrepresntation

Fraudulent Deceit Negligent Misrepresentation Innocent Misrepresentation
Be a statement of Fact Test for Fraud: Case 1
and Be relied upon
Statement is made which is either:
- Knowingly false OR False statement made without
Statement must be one of past or existing For misrep to exist, Def: False Statement made without due care
- Without Belief in its truth OR fault (made honestly and with
fact. Statement must::
- Reckless whether True or False care)
Types of Representations: Be material – would have infleunced Statement made:
Statement made:
The following are generally notnot any reaosnable person AND (1) With no reasonable ground to believe it
Dishonesty is the touchstone which (1) Honestly
ststament of fact. There are exceptions: Did induce contractRepresentee is true S2(1) MA
distinguishes fraudulent misrepresentation (2) With reason to believe
(1)Puffs relied on it
from other forms of misrepresentation it is true
More detailed statements: More likely to Remedies:
Mention 2 (1)Damage in an action under tort of deceit.
be representations Need not be sole inducing case Remedy:
(Intention and Belief is impt of representor Damages are awarded to compensate
(2)Opinions: Sufficient as long as representation (1)Common Law
is impt representee for all the losses which can properly
Maker had access to relevant facts and played a real and subtaantive part and No remedies for innocent
Remedies: be said to have been caused by his reliance on
had no reasonable ground for holding such operated on misrepresentee’s misrepresentation
(1)Damages in an action under Tort of negligent misrepresentation
an opinion: Case 1 mind(Edgington v Fitzmaurice) (2)Equity
Deceit
Inequality of knowledge of relevant As long as reliance is proven, it does Representee is entitled to
Damages are awarded to compensate Measurement of Damages:
facts:Statement of opinion can amt to not matter that representee was rescission and possibly
representee for all the losses which can (1) Contract Measure
misrep when representor knows more than negligent in not verifying representation indemnity.
properly be said to have been caused by To place representee in a position where he
representee
reliance on fraudulent misrep. would have been had representation been true.
(3)Intentions Absence of inducement:
(2)Rescission “as of right” (innocent party (2) Tort Measure
A misrep as to the state of a man’s mind is (1)Representee relied on his own
may rescind or affirm the contract) To place representee in a position he would
a misstatement of fact Case 2 independent info or verification and did
If person does not honestly hold intention not in any way rely on misrep Case 1 have been if misrep had not been committed..
Burden of Proof(High degree of proof req)
he expressmisrep (2)Notion of inducement not by oral
Representee bears burden of proving fraud. Burden of Proof:
Note: Statement of intention for future representation by by “own assumption”
Note: Motive of representtee irerelevant (1)The representee bears burden of proving
event is not statement of past/existing fact that subject matter corresponds to desc
It suffices false statement was made statement is false
(4)Law prev given Case 2
knowingly with intention for representee to Once proven false, burden of proof is reversed:
Can be a misrep if representor did not Case 1: Peekay Intermark v ANZ
act upon it (2)Representor has to prove that he had
hold that opinion or belief of law Banking Group Ltd(2006)
Case 1: Derry v Peek(1889) reasonable grounds to believe that statement
Case 1: Esso Petroleum v Mardon Case 2: Orient Centre Investments Ltd
Mention 2: Raiffeisen Zentralbank was true.
Case 2: Edgington v Fitzmaurice(1885) v Societe Generale(2007)
Osterreich AG v Archer Daniels Midland Co
Exclusion of Liability:
Misrep by Conduct: At common Law, apart from where representor is fraudulent, an exclusion of liability clause is
(1)Spoken, written , visual media valid and subject to incoporation and construction applicable to exemption clauses.
(2)Express statement include implied representation EG “Lowflux is AAA-rated” Requirements:
(3)Implied misrep by conduct: - ‘A nod or a wink or a shake of the head or a smile’ – Case: Walters v Morgan Contract clause excluding liability for misrepresentation must be reasonable: Section (3)
(4)Silence: General Rule: Silence does not amt to misrep – Case: Keates v Lord Cadogan Misrepresentation Act
Exceptions: Note: No exclusion allowed for own fraud
(1)Misleading half-truth: It is possible to exclude someone else’s fraud
(2)Where statement is made abt representor which he knows is fale but does not correct It is possible to exclude liability for negligent misrepresentation, or innocent misrepresentation
(3)Pre-contract change in circumstances makes prev truthful statement misleading Case: Spice Girls v Aprilia World Service (4) An “entire agreement clause” can prevent a representee from alleging misrepresentation:
(4)Where law imposes duty of disclosure – EG Insurance contracts (Estoppel by Representation)
 MISREPRESENTATION ACT
Negligent Misrepresentation:
Two possible routes to liability:
Week 5: Misrepresentation (1)Section 2(1) Misrepresentation Act
 Maker of a false statement is liable if he has no reasonable grounds (objective ascertainment) to believe the statement is true, and…(subjective)
Be false Be addressed to (2)Tort of negligent misstatement If maker of untrue statement in breach of a duty of care to representee
Misled Party Case:(Hedley Byrne v Heller & Partners (1964))
See: Ng Buay Hock v Tan Keng Huat [1997]
Generally, it is the direct addressee
For misrep to exist, statement
or recipient of a representation who Remedies:
must be false.
may bring an action for Under Misrepresentation Act (requires a contract)
Ambiguity:
misrepresentation. Rescission (but court may award damages instead of rescission: Section 2(2) MA)
Sometimes a statement may
Exceptions: Damages: Under Section 2(1) MA
be ambiguous and bear >2
(1)Where representation is made to Same as for fraudulent misrepresentation unless the representor proves that he had reasonable ground to believe (objective ascertainment) and did
meanings, one of which is true
representee’s authorised agent believe (subjective ascertainment) up to the time o the contract was made that the facts represented were true The MA imposes an absolute
and the others flase.
where recipienf is only an agent obligation not to state facts which the representor cannot prove he had reasonable ground to believe
for passing on representation to his
Determing factors:
orincipal. (Principal: representee) Under Common Law (Tort of Negligent Misstatement)
(1)Representee must preve
where representor intends that Rescission (at court’s discretion)
that he understood the
both agent and principal will be Damages : For all losses that are reasonably foreseeable
statement in the way that it
influenced by representation(both
would be false.
prinicipal and agent are Innocent Misrep:
(2)Representor must have
representees) Remedies
intended the statement to be
(2)Where, even tho there is no Rescission (at court’s discretion) (in equity)
understood in the sense that
agency bw direct recipient and Prior to MA: No award of damages, but indemnity permitted (in equity)
is false
indirect recipient, the representor With MA: Court may award damages in lieu of rescission if court thinks it is equitable to do so in exercise of its discretion under s2(2)
He is not liable if he
intended or reasonably expected the
honestly intended it in sense
representation to be passed on to Advantages of the MA
that is true.
the indirect recipient. Presumption of fraudulent misrepresentation, onus on defendant to prove otherwise
No effect of exclusion clauses unless they meet the UCTA requirement of reasonableness (Section 3 MA),
No need for special relationship
But:
Section 1  “Where a person has entered into a contract…”  If no contract, then cannot use MA
Section 2(2)  “and he would be entitled…to rescind the contract…”  If the contract cannot be rescinded, there can be no award of damages in lieu
Government of Zanzibar v British Aerospace

MISREPRESENTATION ACT:
Damages for misrepresentation
2.—(1) Where a person has entered into a contract after a misrepresentation has been made to him by another party thereto and as a result thereof he has suffered loss,
then, if the person making the misrepresentation would be liable to damages in respect thereof had the misrepresentation been made fraudulently, that person shall be
so liable notwithstanding that the misrepresentation was not made fraudulently, unless he proves that he had reasonable ground to believe and did believe up to the time the
contract was made that the facts represented were true.

(2) Where a person has entered into a contract after amisrepresentation has been made to him otherwise thanfraudulently, and he would be entitled, by reason of the
misrepresentation, to rescind the contract, then, if it is claimed, in any proceedings arising out of the contract, that the contract ought to be or has been rescinded, the court
or arbitrator may declare the contract subsisting and award damages in lieu of rescission, if of opinion that it would be equitable to do so, having regard to the nature
of the misrepresentation and the loss that would be caused by it if the contract were upheld, as well as to the loss that rescission would cause to the other party.

(3) Damages may be awarded against a person under subsection (2) whether or not he is liable to damages under subsection (1), but where he is so liable any award under
subsection (2) shall be taken into account in assessing his liability under subsection (1)