MISREPRESENTATION
English law does not recognise the existence of a general duty to disclose information, it does however impose a duty not to make false representation. Representation simply asserts the truth of a given state of fact and it is not a promise Kleinwort Benson Ltd v Malaysia Mining Corporation Berhad (1989) letter of comfort for £10 million loan to a subsidiary company was held not to be contractual promised but a representation of fact. A promise (terms in context of a contract) may be defined as a statement by which the maker accepts an obligation to do or not do something. Legal representation is a statement of fact which induces a party to enter a contract or otherwise act to his detriment. The distinction between terms and representations rests upon the intention of the parties as objectively ascertained i.e. did the parties intend that the statement maker was making a binding promise as to the truth of the statement. Lord Moulton said the intention of the parties can only be deduced from the totality of evidence and no secondary principle of such kind can be universally true - Heilbut, Symons &Co. v Buckelton (1913). Misrepresentation lies on the boundary of contract, tort and restitution.
Misrepresentation may therefore be defined as unambiguous, false state of fact or fact which is addressed to the party misled to induce them to enter into a contract Esso Petroleum Esso Petroleum Co. Ltd v Mardon (1976) Expert advise on likely sale at a petrol station, Commercial Bank of Sydney v R H Brown & Co. (1972) the bank misrepresented the claimant customer’s financial standing was held responsible for the damages. The must induced the representee to enter into a contract and the onus lies on representor to show that the representee did not in fact rely on the representation Museprime Properties Limited v Adhill Properties Ltd (1991) and County Nat West v Baron (2004). In Edginto v Fitzmaurice (1885 – Directors of a company who invited the public to subscribe to the debenture on the basis that the money would be used to grow the business but use it to pay company’s debt) the court held that the misrepresentation need not be the sole inducement. It is sufficient that it was and inducement which was actively present in the representee’s mind. The claimant will not be able to show that the representation induced the contract where he was unaware of the misrepresentation Horsefall v Thomas (1862), where he knew it was untrue and did not allow it to affect his judgement Smith v Chadwick (1884) or rely his own judgement Atward v Small (1938) - Sale of nine and reliance on buyer’s opinion rather than the seller’s.
One of the four types of misrepresentation is fraudulent misrepresentation - Derry v Peek (1989). There must be proof of fraud and fraud is proven when it is shown that false statement had been made knowingly, without belief in its truth or reckless (careless whether it is true or not). If fraud is proved, the motive of the person guilty is immaterial. It is a ground for setting aside a contract and also the tort of deceit. Negligent misrepresentation is the second type of misrepresentation. The House of Lord recognised it in Nocton v Lord Ashburton (1914) where there is a pre-existin contract, parties in judicial relationship. The ambit of liability for negligent was expanded in Hedley Burne v Heller (19164) – the reference from the bankers of Easipower that they were good but given with a disclaimer. Important issues in being liable for misrepresentation include knowledge of the presenter and reliance by the represented and it must be reasonable for the representee to rely on the statement. Social or domestic environment carries different weight.
The third type of misrepresentation is liability under s.2(1) of the Misrepresentation Act 1967. It imposes liability by reference to fraudulent misrepresentation even though the misrepresentor had not been fraudulent. Under the section where misrepresentation is made the party is liable for damages unless he can prove that he has reasonable ground to belief and did belief that the statement was true. It does not require relationship and once the representor is liable the measure of damages recoverable under the section is measure of damages for tort of deceit Royscot Trust Ltd v Rogerson (1991).
The final type of misrepresentation is an innocent misrepresentation which is neither fraudulent nor negligent.
REMEDIES
Notwithstanding the statutory advantage a claimant must have recourse to common law in there situations:
a) where the misrepresentation is made by a third party
b) Where the contract is void ab initio
c) The court may hesitate to find existence of misrepresentation given the draconian Avon Insurance Plc v Swire Frazer Lrd (2001)
In view of the fact that Misrepresentation renders a contract voidable, the remedies available to the injured party are rescission and damages.
Rescission is available in principle for all types of misrepresentation as it set asides the contract for all purposes and seek to restore the parties to where they were before the contract (retrospective). Rescission for breach releases the party from future obligations but the contract is not treated as if it never existed. The injured party is required to give notice of rescission and right to rescind may be lost by affirmation. This may be to protect an innocent third party or due to lapse of time. Contractual damages cannot be claimed for rescission but personal restitutionary claim may be available Withintin v Seale Hoyne while other loses are only available in tort.
Contractual damages does not lie for misrepresentation unless the damages is incorporated into the contract. Damages may be recovered in tort for fraudulent and negligent misrepresentation. The aim of damages is to put the defendant where he would have been. Exemplary (or punitive) damage is recoverable Kuddues 2002. Aggravated damages may be awarded for injured feelings Archer v Brown (1985). The court is basically ready to give reliance interest rather than expectation interest. Damages may be reduced on the basis of contributory negligence Gran Gelato Ltd (1992). Damages are not available for innocent misrepresentation and power award damages is discretionary and re in lieu of rescission.
The measure of damages under s.2(2) should never exceed the sum if the representation has been a warranty. If a claimant lost the right to rescind, he may not get damages due to lapse of time Thomas Miller v TBP Industries Ltd but Flood of Queenferry Ltd v Shand Construction Ltd (2001) did not follow this.
EXCLUSION CLAUSES
At common laws a person could not exclude liability for his own fraudulent misrepresentation S Pearson & Sons Ltd v Dublin Corporation (1907) and High Casualty and General Insurance Ltd v Chase Manhattan Bank (2006) but could exclude liability for negligent or innocent misrepresentation subject to strict rules relating to incorporation and construction s.3 of the Misrepresentation Act (as amended by s.8 of the Unfair Consumer Contract Act 1968) limits the freedom of parties to exclude liability for the consequences of misrepresentation. In Watford Electronics Ltd v Sanderson CFL Ltd (2001) and Overbrooke Estates Ltd v Glencombe Properties Lted (1974) Courts have concluded that the section does not apply where one party acknowledges that he has not relied on a statement made by the other part. That notwithstanding in Cremdean Properties v Nash (1979) and South Western Property Ltd. Court have held such clause to be within the scope of s.3. There are three major remedies available to an injured party in a contract. These are rescission, remedy and specific performance.
Rescission
Rescission is available in principle to all types of misrepresentation. For rescission for misrepresentation the contract is set aside for all purpose and the aim is to restore the party to where they were before the contract. It has retrospective effect. Rescission for breach releases the party from future obligation but would not threat the contract as if it never existed. Right to rescind may be lost by affirmation, intervention of an innocent third party or lapse of time. For rescission contract damages cannot be claimed, but personal restitutionary claim may be available Withinton v Seale Hayne. Other losses are only available in fort. If a claimant lost the right to rescind, he may not get damages due to lapse of time Thomas Willer v TDP Industries Ltd (1996). However, Floods of Queenferry Lrd v Shawd Construction Ltd. (2001) did not follow the decision.
Damages
Contractual damages do not lie for misrepresentation unless incorporated. Damages may however be recovered in tort for fraudulent or negligent misrepresentation. The aim of damages was to put the contract where they would have been without the breach. Exemplary (or punitive) damages can be recovered (2002). Aggravated damages may be awarded to compensate for injured feeling (Archer v Brown (1985). Basically, the court is ready to give reliance interest rather than of expectation interest. Example of reliance interest is Royscot (1991). Damages may be reduced on the basis of contributory negligence Gran Gelato (1992). Power to award damages is discretionary.
REMEDIES
Notwithstanding the statutory advantage a claimant must have recourse to common law in there situations:
d) where the misrepresentation is made by a third party
e) Where the contract is void ab initio
f) The court may hesitate to find existence of misrepresentation given the draconian Avon Insurance Plc v Swire Frazer Lrd (2001)
In view of the fact that Misrepresentation renders a contract voidable, the remedies available to the injured party are rescission and damages. Rescission is available in principle for all types of misrepresentation as it set asides the contract for all purposes and seek to restore the parties to where they were before the contract (retrospective). Rescission for breach releases the party from future obligations but the contract is not treated as if it never existed. The injured party is required to give notice of rescission and right to rescind may be lost by affirmation. This may be to protect an innocent third party or due to lapse of time. Contractual damages cannot be claimed for rescission but personal restitutionary claim may be available Withintin v Seale Hoyne while other loses are only available in tort. Contractual damages does not lie for misrepresentation unless the damages is incorporated into the contract. Damages may be recovered in tort for fraudulent and negligent misrepresentation. The aim of damages is to put the defendant where he would have been. Exemplary (or punitive) damage is recoverable Kuddues 2002. Aggravated damages may be awarded for injured feelings Archer v Brown (1985). The court is basically ready to give reliance interest rather than expectation interest. Damages may be reduced on the basis of contributory negligence Gran Gelato Ltd (1992). Damages are not available for innocent misrepresentation and power award damages is discretionary and re in lieu of rescission.
The measure of damages under s.2(2) should never exceed the sum if the representation has been a warranty. If a claimant lost the right to rescind, he may not get damages due to lapse of time Thomas Miller v TBP Industries Ltd but Flood of Queenferry Ltd v Shand Construction Ltd (2001) did not follow this.
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