用戶:Hinnia/Misrepresentation

Concept of Misrepresentation

"an unambiguous false statement of fact, made to the claimant, which induced him to enter into a contract"

It induces a party to enter a contract but is typically not part of the contract itself

Occupies a "borderland between contract, tort, and restitution"

The law is "the law of induced mistake"

Relief rests not on the claimant's mistake but on the fact that the mistake was induced by a false statement of fact.

Difference Between Misrepresentations and Warranties

A pre-contractual statement may be either a representation (inducing contract) or a term of the contract (warranty)

Remedial consequences differ:

• Term: Failure to comply = breach of contract → remedies for breach
• Representation: Claim is for misrepresentation → remedies in this chapter

A statement can be both a term and give rise to a misrepresentation claim.

Section 1(a) Misrepresentation Act 1967

Right to rescind for misrepresentation survives even if statement later incorporated as a term (Salt v. Stratstone Specialist Ltd [2015])

Claimant may have both breach of contract remedies and possibility of rescission for misrepresentation

Cases

• Heilbut, Symons & Co v Buckleton
• Clark Goldring & Page Limited v ANC Limited
• Oscar Chess Ltd v Williams

Requirements of an Actionable Misrepresentation

Representation Must Be False

"A statement which is true obviously cannot give rise to a claim for misrepresentation"

• Dimmock v Hallet
• With v O'Flanagan
• Misrepresentation Act 1967, s. 2(1)
• Conlon v Simms

Representation Must Be One of Fact, Not of Opinion

• Bisset v. Wilkinson
  • Both parties knew land never used as sheep farm
  • Both equally able to form opinion
  • Statement about land's carrying capacity held to be statement of opinion
  • Not actionable

Exception where opinion implies facts

• Smith v. Land and House Property Corp
  • If the facts are not equally well known to both sides
  • Then a statement of opinion by one who knows the facts
  • Best involves very often a statement of a material fact
  • For he impliedly states that he knows facts which justify his opinion

• Esso Petroleum Ltd v. Mardon
  • Statement of opinion actionable where maker has special skill but fails to exercise it

If facts equally known, court may refuse implication

Express refusal to assume responsibility may negate implication (IFE Fund SA)

Representation Must Be One of Fact, Not of Intention

• Statement of intention cannot generally constitute misrepresentation.
  • Exception: If maker misstates his present intention
    • Edgington v. Fitzmaurice
      • "The state of a man's mind is as much a fact as the state of his digestion."
    • Misrepresentation as to state of mind = misstatement of fact
• Changing mind:
  • True statement of present intention then changing mind = not misrepresentation
    • Kleinwort Benson; Wales v. Wadham

May the Representation Be One of Law?

Yes

"It is now established that... a misrepresentation of law can found a cause of action" Pankhania

Mistake of law can entitle party to set aside contract Brennan v. Bolt Burden

Representation Must Be Addressed to the Party Misled

• Directly: To the party.
• Indirectly: To third party with the intention they pass it to claimant
• (e.g., bank to bank: Commercial Banking of Sydney)

Representation Must Be Intended to Be Acted Upon

This is implicit in the requirement that it "induced him to enter into a contract"

In fraudulent misrepresentation, intention to deceive is required Derry v. Peek

Representation Must Induce the Contract and It Must Be Material

• Inducement: Must be a cause of entry
• 'But for' test: Generally required. If claimant would have entered anyway, no claim (Versloot Dredging)
• Not induced if:
  • Unaware of statement;
  • Not actively present to mind;
  • Relied on third party;
  • Correction made before reliance
• Multiple inducements okay: Need not be only inducement (Edgington)
• A "material" statement: One that would affect mind of reasonable person deciding whether to contract
  • Role in case-law:
    • If material: Court presumes inducement → burden shifts to representor to show no reliance (Museprime Properties)
    • If not material: Burden on representee to prove actual inducement (Dadourian Group)
    • Fraud exception: Materiality requirement does not apply where representation fraudulent (Ross River Ltd)
    • Representee's negligence: Failure to discover truth through diligence does not prevent inducement (Redgrave v. Hurd)

Types of Misrepresentations

Fraudulent

Definition (Derry v. Peek)

False statement made

Knowingly, or

Without belief in truth, or

Recklessly

Innocent

Made honestly, with reasonable grounds for belief.

Historically gave right to rescission but not damages

Negligent

• Duty of Care Principle: Recognised that negligent misrepresentation could give rise to damages in tort (Hedley Byrne)
• Assumption of Responsibility Principle
  • Henderson v Merrett Syndicates
    • If a person assumes responsibility to another in respect of certain services
    • No reason why he should not be liable in damages for that other in respect of economic loss which flows from the negligent performance of those services.
• Concurrent duties in tort and contract
  • Henderson v Merrett Syndicates
    • Common law is not antipathetic to concurrent liability
    • No sound basis for a rule which automatically restricts the claimant to either a tortious or a contractual remedy
    • Result may be untidy
    • But given that the tortious duty is imposed by the general law
    • Contractual duty is attributable to the will of the parties
    • Do not find it objectionable that the claimant may be entitled to take advantage of the remedy which is most advantageous to him

Statutory

• Misrepresentation Act 1967, s. 2(1)
  • Creates statutory right to damages for negligent and some innocent misrepresentations
  • Reversed burden of proof
  • Representor liable unless proves "had reasonable grounds to believe and did believe" facts true
  • Advantages over common law negligence: No need to prove duty of care or breach; more generous remoteness rule
• Royscot Trust v. Rogerson
  • Damages under s.2(1) measured as if for fraudulent misrepresentation (deceit measure) → all direct losses, even unforeseeable
• Howard Marine v. Ogden
  • Illustrates difficulty discharging burden of proving reasonable grounds

Remedies

Damages

Fraudulent Misrepresentation (Deceit)

• Derry v. Peek test
• Measure: All direct losses flowing from entering contract, whether foreseeable or not
• Contributory negligence: Defence not available

Negligent Misrepresentation (Common Law)

• Must prove duty of care, breach, causation.
• Measure: Foreseeable losses
• Contributory negligence: Defence available

Misrepresentation Act 1967, s. 2

• Subsection (1)
  • Relationship with deceit: Largely supersedes deceit for contracting parties
  • When other claims preferable:
    • No contractual relationship;
    • claimant careless (avoid contributory negligence);
    • court may hesitate given draconian consequences;
    • misrepresentation in contract itself;
    • third-party misrepresentor;
    • consumer regulation applies

• Subsection (2)
  • Court discretion to award damages in lieu of rescission for non-fraudulent misrepresentation
  • Court may declare contract subsisting and award damages if equitable, having regard to:
    • Nature of misrepresentation;
    • Loss if contract upheld;
    • Loss rescission would cause other party
  • William Sindall v. Cambridgeshire CC: Used to stop escape from bad bargain

• Measure of damages: Different from s.2(1)
  • Should compensate for loss from property not being as represented;
  • "should never exceed sum would awarded if representation warranty"

• Jurisdiction: Only if entitlement to rescind exists at hearing/purported rescission date (Salt v. Stratstone)

Rescission

• 1) Nature of Rescission
  • Available for all types of misrepresentation (fraudulent, negligent, innocent)
  • Sets aside contract for all purposes, retrospectively and prospectively .
    • Aim: Restore parties to pre-contract position .
  • Redgrave v. Hurd (1881)
    • Establishes rescission available for innocent misrepresentation
    • Negligence of representee no defence.
• 2) Misrepresentation Incorporated as a Term of the Contract
  • Section 1(a) Misrepresentation Act 1967
    • Right to rescind survives
    • Even if statement incorporated as term (Salt v. Stratstone).
  • Claimant may have both remedies.
• 3) The Claimant’s Choice Between Seeking Rescission and Claiming Damages for Fraud
  • Archer v Brown [1984] 2 All ER 267
  • No double recovery
• 4) Rescission and an Indemnity
  • Whittington v. Seale-Hayne (1900)
    • Land is told to be perfect and safe condition
    • Can rescind contract
    • Gets an indemnity: Can get back the property tax
    • However can’t get damages for dead chickens
  • After rescission
  • Can bring personal restitutionary claim ("indemnity") to recover benefits conferred under contract
    • However does not cover consequential losses.
• 5) Restrictions on the Right to Rescind
  • (a) Restitution Impossible
    • Common law strict: Must restore exact benefit (Clarke v. Dickson).
    • Equity flexible ("practical justice"): Erlanger v. New Sombrero Phosphate Co – can account for profits/deterioration.
    • Halpern v. Halpern: Aim is prevent unjust enrichment of claimant, not perfect restoration.
    • Salt v. Stratstone: Monetary awards can achieve substantial restoration; barrier reduced.
  • (b) Affirmation/Lapse of Time, Estoppel
    • Affirmation: After discovering truth, electing to continue contract.
    • Lapse of Time/Laches:
      •   Salt v. Stratstone: "Lapse of time on its own can [not] be a bar."
        • Now part of laches – bar if lapse of reasonable time makes it inequitable to grant rescission.
      •   Leaf v. International Galleries [1950] (5-year delay) may require reconsideration under this approach.
  • (c) Third Party Rights
    • If bona fide third party purchaser for value acquires goods before rescission, right lost.
    • Car and Universal Finance Co v. Caldwell [1965]
      • A enters contract with B on basis of misrep
        • A has right to rescind contract
        • Contract is voidable
      • B enters contract with C
        • Bona fide purchaser for value without notice 付出價值及沒有被知悉的真誠購買人
        • Didn’t know about the wrong
      • A’s contract with B cannot be voided
    • Phillips v Brooks
      • Jeweller sells to Mr North
      • North claimed to be another person
      • North pawns jewellery to Brooks
      • Brooks doesn’t know anything about the fraud
      • Jeweller cannot rescind
      • Intervention of 3rd party rights

Exclusion of Liability for Misrepresentations.

• Contractual exclusions or restrictions of liability or remedies for misrepresentations
  • Only effective to the extent that they are reasonable
• Under s. 11(1) of the Unfair Contract Terms Act 1977:
  • s. 3(1) If a contract contains a term which would exclude or restrict—
    • (a) any liability to which a party to a contract may be subject by reason of any misrepresentation made by him before the contract was made; or
    • (b) any remedy available to another party to the contract by reason of such a misrepresentation,
  • Term has no effect unless satisfies requirement of reasonableness
    • Stated in s11(1) of the Unfair Contract Terms Act 1977
      • It is for those claiming that the term satisfies that requirement to show that it does.
• Fraud: Cannot exclude liability for own fraudulent misrepresentation (S Pearson v. Dublin Corp).
• Agent's fraud: Unclear if excludable; would require "clear and unmistakable terms" (HIH Casualty v. Chase Manhattan Bank).
• "No-Reliance" & "Entire Agreement" Clauses:
  • First Tower Trustees Ltd v. CDS: Clause stating no reliance placed on representations caught by s.3 and subject to reasonableness test.
    • Policy: s.3 aims to prevent escaping liability unless reasonable; substance over form.
  • Cremdean Properties v. Nash: "Ingenuity of draftsman" won't defeat s.3's purpose
    • Drafting: Safer to exclude "any representation other than one made fraudulently"
  • IFE Fund SA v GSI International [2007] EWCA Civ 811
    • Foundation for liability for negligent misstatements demonstrates that
      • Where the terms on which someone is prepared to give advice or make a statement negatives any assumption of responsibility
        • No duty of care will be owed
      • Although there might be cases where the law would impose a duty by virtue of a particular state of facts
        • Despite an attempt not “to assume responsibility”,
      • Relationship between GSI either as arranger or as vendor would not be one of them.

Note that s. 3 does not apply to a contract between a consumer and a trader:

• Misrepresentation Act 1967, s3(2) This section does not apply to a term in a consumer contract within the meaning of Part 2 of the Consumer Rights Act  
• s. 62 Consumer Rights Act 2015 provides that an unfair term of a consumer contract between a trader and a consumer is not binding upon a consumer. 
• ‘Consumer’ is defined in s. 2(3) as ‘an individual acting for purposes that are wholly or mainly outside that individual's trade, business, craft or profession’;
• ‘trader’ is defined in s.2(2) as ‘a person acting for purposes relating to that person's trade, business, craft or profession, whether acting personally or through another person acting in the trader's name or on the trader's behalf’.
• s. 62 of the Consumer Rights Act 2015 provides the means by which it is to be determined if a term is unfair.