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Aslam Contract

Misrepresentation in contract law significantly affects the consent of parties involved, as it involves false statements that induce one party to enter into a contract. Legal positions on misrepresentation include representations as to the future, statements of law, mere puffs, reliance on fraudulent statements, and representations that become false due to later events. Each category has specific legal implications and case law that illustrate how misrepresentation can impact the validity and enforceability of contracts.

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8 views3 pages

Aslam Contract

Misrepresentation in contract law significantly affects the consent of parties involved, as it involves false statements that induce one party to enter into a contract. Legal positions on misrepresentation include representations as to the future, statements of law, mere puffs, reliance on fraudulent statements, and representations that become false due to later events. Each category has specific legal implications and case law that illustrate how misrepresentation can impact the validity and enforceability of contracts.

Uploaded by

tamiraalexander256
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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NAME ; ASLAM HARUNA

REG No ; 124-053011-35375
QTN2; What is the position of the law on the following in as far as misrepresentation
is viewed in the law of contract;

Misrepresentation is one of the factors that significantly impact the consent of


contracting parties. To fully comprehend misrepresentation, it is essential to first
understand the concept of representation. Representation can be described as a factual
statement made by one party to another during negotiations leading to a contract. It is
one of the key elements that influence the representee to enter into the agreement.
Essentially, representation is a statement made to persuade the other party to agree to
a contract.

When a party makes a misrepresentation, it can affect the contract in various ways.
Misrepresentation involves making a false statement of fact that induces the recipient
to enter into a contract. Since the statement is untrue, it can impact the validity and
enforceability of the contract.

The legal position regarding misrepresentation in contract law is discussed below:

a) Representations as to the Future

A representation is a factual statement made by one party to another during contract


negotiations, influencing the latter’s decision to enter the agreement. However,
statements regarding future events—such as predictions or promises—are generally
not considered statements of fact and, therefore, do not constitute misrepresentation in
the strict legal sense. In Edgington v Fitzmaurice, the plaintiff was misled by
company directors into lending money under the belief that it would be used for
business expansion. However, in reality, the funds were intended to settle company
debts. Consequently, the directors were held accountable for deceit.

b) Statements of Law

This refers to false factual statements made by one party to another, leading the latter
to enter into a contract. Generally, statements of law are not considered actionable as
misrepresentation. In Pankhania v Hackney London Borough Council (2002), a
buyer was falsely informed that a property was occupied under a license, but it was
later discovered that the occupants had legally protected tenancy rights. The court
ruled that misstatements regarding legal rights amounted to misrepresentation since
the buyer had relied on the seller’s legal expertise. The legal principle states that
everyone is presumed to know the law, meaning a person cannot claim to have been
misled about the law unless the misstatement originates from someone with
specialized legal knowledge.

c) Mere Puffs

This refers to exaggerated or promotional statements made during contract


negotiations, which are not intended to be taken literally or relied upon. Such
statements have no legal effect because they are too vague to be considered legally
binding representations. This principle was demonstrated in Dimmock v Hallett
(1866), where a piece of land was advertised as “very fertile.” The buyer later
discovered that the land was not as productive as claimed and attempted to sue for
misrepresentation. However, the court ruled that the description was merely a
promotional flourish rather than a factual statement.

d) Reliance on a Fraudulent Statement

This occurs when a person deliberately makes a false statement without believing it to
be true, intending to deceive the other party and causing them to rely on it. This is
addressed under Section 14 of the Contracts Act, Cap 284. In Derry v Peek (1889),
the plaintiff relied on a false statement made by the defendant, who claimed that his
company had the right to use steam-powered locomotives. As a result of this
misrepresentation, the plaintiff purchased shares in the company. The court ruled in
favor of the plaintiff, determining that the misstatement constituted fraudulent
misrepresentation. Therefore, reliance on a fraudulent statement is legally recognized
as misrepresentation.

e) Representations That Become False Due to Later Events

This situation arises when a statement is true at the time it is made but later becomes
false due to changing circumstances. This issue is particularly relevant in legal and
contractual matters where an initially accurate representation becomes misleading
over time. In With v O’Flanagan (1936), a doctor selling his medical practice
represented that it generated an annual income of €2,000. However, by the time the
sale was finalized, the practice’s income had dropped significantly due to the doctor’s
illness, and the seller failed to inform the buyer. The court ruled that the statement was
a continuing representation and that the seller had a duty to disclose the change in
circumstances. Failure to do so constituted misrepresentation.

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