________________________________________________________________

Contract Law II

LAW 2110

Semester I, 2020/2021

TOPIC #1
 NOTICE
The material contained in this Worksheet is in
the nature of general comment only and is
not advice on any particular matter.
No one should act on the basis of anything
contained in this Worksheet without taking
appropriate professional advice upon the
particular circumstances.
The Publisher, the Editors, and the Authors
do not accept responsibility for the
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to be taken by any person, whether a
subscriber to this Worksheet or not, as a
consequences of anything contained in or
omitted from this Worksheet

©2020

Alana Lancaster, Ph.D Candidate, LL.M. (Marine & Environmental Law),

M.Sc. (Terr. Resc. Mgt.), LL.B.(Hons), B.Sc. (Env.Sc.),
Post. Grad. Dip. Ed. (Science), Post Grad. Dip. (Development Studies),
Post Grad. Cert. (University Teaching & Learning)

Course Director

The original material prepared for this Worksheet is copyright.

Apart from fair dealing for the purposes of private study, research, criticism or review,
as permitted under the Copyright Act, 1998
no part may be reproduced by any process without written permission

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LAW 2110
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Topic 1
Misrepresentation

A. introduction – the nature of vitiating factors; void and voidable contracts

B. misrepresentation

C. elements of misrepresentation

D. types of misrepresentation

E. remedies for misrepresentation

Learning Outcomes

By the end of this Topic, students should be able to :

1. examine misrepresentation as a vitiating factor in contract law;

2. discuss the elements of misrepresentation;

3. analyze the types of misrepresentation;

4. assess the remedies available for misrepresentation.

5. describe and effectively deploy – case law and secondary sources, in both problem and essay
questions – the vitiating factor of misrepresentation.

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topic map

misrepresentation

• statement of material fact

o opinion

o sales talk

o statements of future intent

o non-disclosure and silence

o misrepresentation by conduct

• made prior to the contract

• inducement into the contract

o existence of the statement

o reliance or inducement

• types of misrepresentation

o fraudulent

o negligent

o innocent

• statutory approaches

o Misrepresentation Act, 1983 (Trinidad & Tobago)

o Law Reform (Misrepresentation and Frustrated Contracts) Act, 1977 (Bermuda)

• remedies

o rescission

o damages
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Task 1:1

Before You Attend The Lecture

A. Read The Following:

Background Reading

This provides general reading that gives context, major ideas and themes, vocabulary of
the subject matter and credible information that can help you to understand the essential
reading

1. Harper James Solicitors, Contracts: Misrepresentation,

online :https://hjsolicitors.co.uk/article/contracts-misrepresentation/

Required Reading

This provides reading that gives specific examples, problem solving solutions, and
detailed analysis that provides tools for critical analysis

1. Mindy Chen-Wishart. Contract Law, 6 ed (Oxford University Press, 2018), 207 – 242

OR

2. Paul Richards. Law of Contract, 14 ed. (Pearson, 2019), 379 – 456

Additional Reading

This provides you with additional sources of information that goes beyond the
background and essential reading

1. Lucia Šírová, ‘Misrepresentation under English Contract Law and Its Comparison to
Slovak Contract Law’ (2016) 16 (2) ICLR, pp. 1 – 8

1
Adapted from the workbook format developed by Dr. Ronnie Yearwood and Mr. Rashad Brathwaite ©2020
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cases

1. Attwood v Small (1838) 6 CI & Fin 232

2. Bisset v Wilkinson [1927] AC 177

3. Car and Universal Finance Co Ltd v Caldwell [1965] 1 QB 525

4. Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256

5. Chao San San & Another v Worldpart Industrial Ltd [2003] HKCA 252,

6. Curtis v Chemical Cleaning and Dyeing Co [1951] 1 KB 805

7. Derry v Peek (1889) LR 14 App Cas 337

8. Dimmock v Hallett (1886) L.R. 2 Ch. App. 21

9. East v Maurer [1990] EWCA Civ 6

10. Edgington v. Fitzmaurice (1885) 29 Ch D 459

11. Esso Petroleum Co Ltd v Mardon [1976] QB 801

12. Gordon v Selico (1986) 18 H.L.R. 219

13. Hedley Byrne & Co Ltd v Heller & Partner Ltd [1963] 2 All ER 575

14. Insurance Company of the West Indies Ltd v Graham JM 2010 SC 92

15. Kleinwort Benson v Lincoln County Council [1999] 2 AC 349

16. Leaf v International Galleries [1950] 2 KB 86

17. Long v Lloyd [1958] 1 WLR 753

18. Pankhania v Hackney LBC [2002] EWHC 2441

19. Re Northumberland District Banking Co, ex parte Bigge

20. Redgrave v Hurd (1880) 20 Ch D 1

21. Simons et al v Magnolia Properties Ltd BM 2007 SC 20

22. Smith v Land & House Property Corporation (1884) LR 28 Ch D 7

23. Spice Girls Ltd v Aprillia World Service BV [2002] EWCA Civ 15

24. With v O’Flanagan [1936] Ch 57

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 B. Make Notes Of The Readings

Before any lecture you need to do the assigned readings, at least to some extent.
Your professors often tell students that this is an essential component of learning the course
material (or having success in lectures). And yet, few students actually heed this advice.

So, do the reading. And whilet you are at it, take notes. The benefits here are three-fold (at least).
First, familiarising yourself with the lecture material in advance will mean you’re clued up on what
will be discussed, and you can spend more time in the lecture focusing on the important bits.
Second, going over the material at least twice will help you commit it to your long-term memory
(great for exams). And third, you can jot down any questions you might have and ask them
during, or after, the lecture.

Reference: https://www.oxbridgeessays.com/blog/master-lecture-notes-tips-really-work/

Notetaking is an important skill. We recommend you consider the methods suggested at

the above link.

To get you started, we recommend you use the Cornell Method. If it does not work for you,
experiment with other styles that fit your needs.

For the Cornell Method, Follow this link:

https://docs.google.com/document/d/1X5vuSm8piiUwnsoYlyTt28inijWNTBvj7-
jGWTUSmSQ/edit?hl=en_US make a copy of this template if you are working on your computer,
or replicate in your notebooks.

For more information: https://www.timeatlas.com/cornell-note-template/

Task 2:

Attend The Lecture

The purpose of a lecture is not to give you all the information you need to pass your module.
Lectures are starting points for your own reading unless you want low marks.

Lectures are used for a variety of reasons:

● to give an overview of a subject, in which case you will need to use your reading to fill in the
detail.

● to cover an important detail, in which case you will need to use your reading to put it into context
and get the bigger picture.

● to cover a conceptual idea and give one or two examples of it in practice - you will need to use
your reading to find more examples to ensure you have grasped the concept fully.

Whatever the purpose, you will need to be able to make effective notes.

Reference: https://canvas.hull.ac.uk/courses/30746/pages/introduction?module_item_id=71654
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Task 3:

During The Lecture

It is important that you focus during lectures, having prepared for classes, with a view to having some of
your own questions, areas of confusion clarified. The point is not to write the lecture word for word.

“Essentially, you only want to write down the main important points. You do this by becoming a really
good listener. The trick to taking good lecture notes is to avoid the tangents and try to pinpoint the stuff
that is important - which may be examined, though not exclusively.

Pay attention to signposts: these might include:

● “you need to know X”

● anything the professor says more loudly or with more emphasis
● anytime there is a relationship (e.g. first…second…finally)
● anytime there are significant signposts (e.g. especially, most significant, consequently, etc.)
At the end of the lecture, we may give a summary, conclusion, or review of the material. These are the
main takeaway points and are likely to be important. Do not pack up your bags early (or in the case of
those online, sign-out early). Wait until the professor is done talking – in these last few minutes,
the professor may be telling you what s/he wants you to know come essay or exam day.

As a side note, remember that what you do and do not take away from the lecture are equally important.
Did you have unanswered questions, or did your mind wander and miss a point? If the answer is yes, it is
important to get these addressed earlier rather than later to make sure that you have a complete set of
notes.

Reference: https://www.oxbridgeessays.com/blog/master-lecture-notes-tips-really-work/

For additional templates of the Cornell Method and further explanation, see
https://templatelab.com/cornell-notes/ . If you come across similar or better resources, feel free to share
them with us.

Asking Questions

At the end of most lectures (and often during) the lecturer will ask if anyone has a question or if further
clarification is needed.

Please do not hesitate to use this opportunity to ask a question about anything you did not understand -
however dumb you feel. It is a cliché, but true, that the only dumb questions are the ones you did not ask.
You will be amazed how often there is a collective sigh of relief when someone asks the question that
everyone was too afraid to ask!

Your lecturers are not scary, and they are not judgemental, they are (usually) nice, friendly people! It is
important that you develop a good relationship with them. Asking questions is a way to show you are
genuinely interested in their subject and they will be happy to answer them.

Reference: https://canvas.hull.ac.uk/courses/30746/pages/introduction?module_item_id=71654

Alternatively, if you have questions and want to submit them, send an email to the
Course Director or your Tutor at least twenty-four hours before class.

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Task 4

Attend The Tutorial

● See tutorial questions in this worksheet

● Before tutorials - Consider the Feynman Method to ensure you understand what you are
engaging with.

Step 1

Write the name of a concept at the top of whatever place you are planning to record your notes. While
purists will push for a physical pen and paper, this isn’t necessarily prescriptive - for example a
whiteboard or digital note taking app may be used, as long as you maintain focus and attention.

Step 2

Begin to write out an explanation of the concept on your recording area. The important thing here is to
write it as if you were explaining it to a layman who has no knowledge of the concept. This will begin to
highlight what you understand, but more importantly where you have gaps in your knowledge.

Step 3

Pinpoint these exact gaps, essentially the areas where explanation is a struggle. Go back to your source
material and reread and relearn these parts. Repeat Step 2 as a feedback loop as many times as you
require.

Step 4

Once you have properly explained the concept, put on your editor's hat. If you are using overly wordy or
confusing language (or simply paraphrasing the source material) keep filtering your content. Humans are
really good at adding complexity - it takes a lot more cognitive effort to remove it. Simplify your language,
and, where possible, use simple analogy.

Reference: https://strategyumwelt.com/frameworks/feynman-technique

Task 5:

After The Lecture And Tutorial

● Consolidate and review your notes

● If you need further assistance, discuss the material with your tutor and/or attend office hours

● Attempt past paper questions.

Note that the references/ footnotes throughout the workbook may not be in the OSCOLA form, so please
correct them.
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 Homework

1. What is the difference between a void contract and a voidable contract?

void contract

voidable contract

2. What is the effect of vitiating factors to covered in Contact Law II?

vitiating factor consequences

misrepresentation if actionable: voidable

mistake if operational: void

frustration if requirements met: contract discharged

depends on whether there is a breach of a term, condition or if the breach is anticipatory

a. for terms: usually damages, as any attempt to repudiate is a breach

breach b. for conditions: damages and/or repudiate

c. anticipatory breach: the victim may discharge the contract immediately or

injured party may wait until performance is due and seek damages

void at common law illegal at common law

illegality
void at statute illegal at statute

3. Have you identified the ratio in each of the following decisions in relation to the vitiating
factor of misrepresentation?

a. Bisset v Wilkinson [1927] AC 177

b. Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256

c. Curtis v Chemical Cleaning and Dyeing Co [1951] 1 KB 805

d. Edgington v. Fitzmaurice (1885) 29 Ch D 459

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 A. MISREPRESENTATION

A misrepresentation is an untrue statement of facts made prior to entering into a contract, and can be
made in writing, orally or by conduct. Where party A makes a misrepresentation to party B which induces
part B to enter into a contract with party A, the contract may be rescinded.

In brief, a misrepresentation is :

• an unambiguous false statement of existing fact;

• made to the claimant;

• which induces them to enter the contract.

Misrepresentation Act, 1983

(Trinidad & Tobago) (3) claimants potential remedies

a term of the contract damages get out of performance

contract

exception termination specific

measure performance

1. contract is a representation fraud

made with the measure
maker of the s 3(1) MA rescission no
statement; the
(T&T/
contract is :
Bermuda)

a mere ‘puff’ without legal effect no no no

2. no contract is fraudulently fraud

made with the measure
maker if the
statement. The
statement is no contract to no contract to
made : negligently negligence escape escape
measure

innocently no

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An important distinction between mistake and misrepresentation is that misrepresentation does not
render a contract void, but merely voidable. A successful claimant can rescind the contract and reclaim
his or her money or property. If this is not possible, for instance because the property no longer exists,
a successful claimant can claim damages. In some cases, a claimant can claim rescission and damages.

In Curtis v Chemical Cleaning and Dyeing Co [1951] 1 KB 805, the plaintiff contracted with the
defendants to clean her dress. She had been asked to sign a form, which the shop assistant represented
as pertaining to the risk that the beads on the dress might get damaged. In fact, it was a contract to
exclude liability altogether. The plaintiffs dress was stained but the exclusion clause was held to be invalid
for misrepresentation.

As neatly illustrated in Gordon v Selico (1986) 18 H.L.R. 219, misrepresentation does not necessarily
have to involve an outright lie on the part of the misrepresentor. In that case, the defendants sold a flat to
the plaintiffs. Before the plaintiffs inspected the flat, the defendants had arranged for painters to cover up
some ‘dry rot’, which would otherwise have been visible. The plaintiffs also instructed a surveyor to
inspect the flat. However, the dry rot was not discovered, and the plaintiffs contracted with the defendants
to buy the flat. They eventually discovered the dry rot after moving into the flat. The Court of Appeal held
that the defendants were liable as the deliberate concealment of the dry rot amounted to
misrepresentation.

However, the usual position, as articulated in the Bermuda case of Simons et al v Magnolia Properties Ltd
BM 2007 SC 20, is that mere non-disclosure does not amount to misrepresentation.

Simons et al v Magnolia Properties Ltd BM 2007 SC 20

The plaintiffs leased premises from the defendants to be used as a restaurant. They later found
out that the premises did not allow for storage of gas canisters, which affected its intended use.
The Supreme Court held that although the plaintiffs had referred to the restaurant using gas
before the lease was signed, the defendants had not made any representation regarding the use
of gas. The court further found that the plaintiffs had had plenty of opportunities to form their own
view as to the suitability of the premises for use as a restaurant. It was held that there was no
misrepresentation

The difference between the two situations is that in Gordon v Selico, the defendants had acted
deliberately to conceal the defects, whereas in Simons et al v Magnolia Properties Ltd, they merely
remained silent.

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misrepresentation defined classes of misrepresentation

misrepresentation is fraudulent misrepresentation

• a falsely made statement of material • brought under the tort of deceit

fact, not opinion (Bisset v Wilkinson),
nor future intention • must be made deliberately or knowingly, without belief in the truth,
(Edgington v Fitzmaurice), or carelessly (Derry v Peek)
nor trade puffs (Carlill v Carbolic Smoke
Ball Co); • so defence merely = honest belief

• made by one party to the other party, • remedies :

not by a third party
o sue for damages under tort measure, including all
(Peyman v Lanjani)
consequential loss (Smith New Court Securities v
• before formation of the contract, Scrimgeour)
not after (Roscoria v Thomas)
o affirm contract, or disaffirm and use as a defence to
• intended to induce the other party to claim of breach, or seek rescission in equity
enter the contract; but not form part of it
negligent misrepresentation

• sue in tort under the rule in Hedley Byrne where there is a ‘special
relationship’

• sue under s. 2(1) the 1967 Misrepresentation Act (U.K.)

(s. 3(1) of the 1983 Misrepresentation Act (Trinidad & Tobago)
(Howard Marine Dredging v Ogden)
misrepresentation
• remedies :

o damages (a measure in tort)

innocent misrepresentation

• sue under s. 2(2) the 1967 Misrepresentation Act (U.K.)

(s. 3(2) of the 1983 Misrepresentation Act (Trinidad & Tobago) for
damages or seek rescission
equity and misrepresentation

contract voidable yet not void, so recission

possible if:
non-disclosure
• resttitutio in integrum possible
no basic common law duty to disclose information not requested
(Lagunas Nitrate v Lagunas
(Fletcher v Krell)
Sindicate)
but exceptions are :
• contract affirmed (Long v Lloyd)
• contracts uberimmae fides (i.e. contracts of utmost good faith
• no excessive delay
e.g. insurance policies) (Locker & Woolf v Western Australia
(Leaf v International Galleries)
Insurance Co.)
• third party rights gained
• part truths (Dimmock v Hallet)
(Car & Universal Finance v Caldwell)
• a true statement which become false (Withp va O’Flannagan)
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indemnity is also possible Worksheet 1
(Whittington v Seale-Hayne) LAW 2110
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 B. ELEMENTS OF MISREPRESENTATION
For a claimant to be able to rely on misrepresentation, three requirements must be satisfied. First, it has
to be shown that there was a representation of an existing fact. Second, the representation must be
untrue. Third, the untrue representation must have induced the party to whom it was made to enter into
the contract.

key definition

an actionable misrepresentation is a statement of material fact made prior to the

contract by one party to the contract to the other which is false or misleading and which
induced the other party to enter into the contract.

1. the misrepresentation must relate to existing fact

To be actionable, a misrepresentation needs to relate to a past or existing fact, as opposed to an opinion

or a prediction. Unless a statement about a future state of affairs is a term of the contract, the making of
such a statement can usually not amount to misrepresentation. In the Hong Kong case of Chao San San
& Another v Worldpart Industrial Ltd [2003] HKCA 252, the Court of Appeal held that no
misrepresentation was present in a case where a property developer had stated that certain amenities
would be provided as part of a new development. The statement was held to have been a genuinely held
belief at the time that it was made. It did not amount to a statement of existing fact. However, in
Edgington v Fitzmaurice (1885) 29 Ch D 459, a statement of intention was deemed to amount to
actionable misrepresentation.

Edgington v. Fitzmaurice (1885) 29 Ch D 459

A company invited shareholders to buy debenture bonds and stated that the money raised
would be used to buy equipment and expand the business. In fact, the money was to be
used to pay off debts. Although statements of intent usually do not fulfill the criteria for
actionably misrepresentation, in this case, the statement was held to be a misrepresentation
as the company never had any intention of using the money to buy equipment and expand
the firm.

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Similarly, to making a prediction, a person who merely makes a statement of opinion can normally not be
held liable for misrepresentation. In Bisset v Wilkinson [1927] AC 177, it was held that a statement which
was not qualified by any specialist knowledge, was a mere opinion and did not amount to a
representation.

However, in Esso Petroleum Co Ltd v Mardon [1976] QB 801, a statement of opinion by the plaintiff’s
employee that a petrol station sold a certain amount of petrol was held to be a statement of fact as the
employee had detailed knowledge of the industry. One way of distinguishing this case
from Bisset v Wilkinson, is that one of the parties was an expert at the matter opined on, whereas the
defendant in Bisset v Wilkinson was not engaged in sheep farming. The decisive question may be
whether the parties were equally ignorant or whether one party had specialist or specific knowledge which
the other party did not have. However, note the decision in Simons et al v Magnolia Properties Ltd, in
which the fact that the plaintiffs had ample opportunities to obtain the relevant facts, but failed to do so,
adversely affected their prospects of successfully invoking misrepresentation.

Bisset v Wilkinson [1927] AC 177

The buyer bought a farm in New Zealand which the seller had said could support 2000 sheep. It
was known to the buyer that the farm had not been used for sheep before. The buyer
subsequently became aware that the farm could not support 2000 sheep and sought to rescind the
contract. The Privy Council found that both buyer and seller were essentially in the same position
in terms of knowledge. Because the seller had not used the farm for sheep and did not have any
specialist knowledge, his statement amounted to a mere opinion and the contract stood.

In the leading case of Smith v Land & House Property Corporation (1884) LR 28 Ch D 7, it was held that
if a statement of opinion implies that the person who makes such a statement knows certain facts, then
such a statement may be actionable for misrepresentation.

Smith v Land & House Property Corporation (1884) LR 28 Ch D 7

The Plaintiff had agreed to sell his property to the defendants. At the time, the property was let to
another party, whom the plaintiff had described as “a most desirable tenant”. It later turned out that
this statement of opinion was inaccurate as the tenant had failed to pay rent on time and
subsequently went bankrupt. The Court of Appeal held that there had been a misrepresentation on
which the defendants had relied, as the plaintiff’s opinion suggested that they knew certain facts
about the tenant. Bowen LJ: “The vendors state that the property is let to a most desirable tenant.
What does that mean? I agree that it is not a guarantee that the tenant will go on paying his rent, but
it is to my mind a guarantee of a different sort, and amounts at least to an assertion that nothing has
occurred in the relations between the landlords and the tenant which can be considered to make the
tenant an unsatisfactory one. That is an assertion of a specific fact.”

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On the same basis, where a person gives an opinion or makes a statement relating to some future fact
without any belief in it, that person may be held liable for misrepresentation (see, e.g., Insurance
Company of the West Indies Ltd v Graham JM 2010 SC 92).

However, a ‘mere puff’, is not treated as misrepresentation (see Carlill v Carbolic Smoke Ball Company
[1893] 1 QB 256).

checkpoint

Which statements might not be treated as being statements of material facts?

Compare the approach in Solle v Butcher [1950] 1 KB 671 and Pankhania v London Borough of
Hackney [2002] NPC 123.

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Statements regarding the law used to be treated in isolation, with the effect that – since everyone is
presumed to know the law – such statements would not be treated as misrepresentations. However,
since the House of Lord’s ruling in Kleinwort Benson v Lincoln County Council [1999] 2 AC 349, this can
no longer be said to be the case (see Pankhania v Hackney LBC [2002] EWHC 2441).

the objectionable legal category test for actionability: actionable as:

conduct:

fact or law statement is false, or statement is true

but:

misleading, or
ACTS
falsified before contract formation
words or misrepresentation
conduct
amounting to
statements of: intention there is a false implied statement of fact
that the representator:

is honest, or
opinion
has reasonable basis for the statement

‘puffs’ not actionable

contract uberrimae fidei there is a duty to disclose the fact actionable

withheld non-disclosure

OMISSIONS
fiduciary relationship breach of fiduciary
duty

doctrines indirectly different tests according to doctrine different remedies

relieving non-disclosure invoked according to
doctrine invoked

actionable statements and omissions

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2. misrepresentation must be false

Aside from having to relate to an existing or past fact, the misrepresentation must also be untrue.
However, an actionable misrepresentation need not be entirely untrue. In Dimmock v Hallett (1886) L.R. 2
Ch. App. 21, the court held that partial non-disclosure may amount to misrepresentation
(see Erlson Precision Holdings Ltd v Hampson Industries plc [2011] EWHC 1137).

Dimmock v Hallett (1886) L.R. 2 Ch. App. 21

The buyer of some land had asked the seller whether the land was let. The seller affirmed that
the land was let. Technically, this statement was true, however, the seller failed to mention that
the tenant had already given notice. This was held to be a misrepresentation.

In Gordon v Selico, silence in the form of the deliberate concealment of a defect in the house was
regarded as a misrepresentation on the part of the seller (see Spice Girls Ltd v Aprillia World Service BV
[2002] EWCA Civ 15)

Where a statement that was true at the time it was made but subsequently became untrue, the person
who made such a statement is obliged to correct it. This obligation only applies up to the point that the
contract is signed.

With v O’Flanagan [1936] Ch 575

The defendant told the plaintiff that his medical practice generated £2000 per year. However,
before the contract to sell the practice to the plaintiff was concluded, business had dropped off
significantly. The failure to inform the plaintiff of the downturn was deemed to be an actionable
misrepresentation. Lord Wright: “Representation made as a matter of inducement to enter a
contract is to be treated as a continuing representation.”

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checkpoint

Is there a general duty to disclose facts to the other party to a contract?

Yes [ ]

No [ ]

Cite one authority to support your choice:

Can silence amount to a misrepresentation?

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3. the misrepresentation must induce the contract

The person to whom the misrepresentation was made must have been misled to the extent that the
misrepresentation led him or her to enter the contract.

In Redgrave v Hurd (1880) 20 Ch D 1, a party who purchased into a partnership had relied on a
statement as to the partnership’s annual income. Although the purchaser did not seek to independently
confirm the statement as to income, it was nevertheless held that the purchaser was entitled to rescind on
the basis of the misrepresentation which was held to have been an inducement to enter into the contract.

However, it is not necessary to show that the misrepresentation was the only reason for entering into the
contract, or even that it was the reason for doing so. As shown in Edgington v Fitzmaurice, if there is
more than one reason for entering a contract, misrepresentation may still find application so long as one
of those reasons arose from a misrepresentation (see BskyB Ltd v HP Enterprise Services UK [2010] All
ER (D) 05 (Jul).

Attwood v Small (1838) 6 CI & Fin 232

The seller of a mine made exaggerated statements as to its earnings. The buyer asked his own
agents to verify these statements. The agents failed to discover the inaccuracy of the
statements and the buyer went ahead and bought the mine. It was held that the buyer could not
set aside the contract because he had, in fact, on the survey report of his own agents, rather
than on the misrepresentation.

The misrepresentation must have affected the judgment of the person induced to enter a contract.
However, where a contract is entered into for independent reasons, notwithstanding that there has been a
misrepresentation, the inducement requirement is not met (see JEB Fastners Ltd v Marks Bloom & Co
[1981] 3 All ER 289).

Re Northumberland District Banking Co, ex parte Bigge (1858) L.J. Ch 50,

The plaintiff bought shares in the defendant company and sought to rescind the contract on the
ground that the company had published false reports about its financial status. His action failed
because, he had not read any of the reports and no one had told him about the reports, before
he bought the shares.

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 C. TYPES OF MISREPRESENTATION

A misrepresentation may be fraudulent, negligent, or innocent. Prior to 1963, the law only knew of
fraudulent and non-fraudulent misrepresentation. Indeed, there were no damages available for non-
fraudulent misrepresentation. However, this changed with the House of Lords’ decision in Hedley Byrne
& Co Ltd v Heller & Partner Ltd [1963] 2 All ER 575

fraudulent misrepresentation

A fraudulent misrepresentation occurs where a statement is made dishonestly. According to

Lord Herschell in Derry v Peek (1889) LR 14 App Cas 337, a fraudulent misrepresentation entails that the
representator knows that the statement is false, or has no belief in its truth, or does not care whether it is
true or false.

key statute

Misrepresentation Act, 1983 (Trinidad & Tobago)/ Bermuda’s Law Reform

(Misrepresentation and Frustrated Contracts) Act 1977, s. 3(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 the facts represented
were true

negligent misrepresentation

A negligent misrepresentation occurs where the representor has no reasonable grounds to believe that
the statement is true (see Hedley Byrne v Heller; Esso Petroleum Co Ltd v Mardon).
Pursuant to the Law Reform Committee’s 1962 Report, parliament in the United Kingdom endeavoured to
pass the Misrepresentation Act 1967 which deals with, amongst others, negligent misrepresentation.
However, the Act has proven controversial as it is based on the law as it was before Hedley Byrne v
Heller. Since the Act places the burden of proof on the person who is alleged to have made a negligent
misstatement, it tends to be more attractive to litigants than to sue at common law. Various
Commonwealth Caribbean nations have adopted similar misrepresentation acts (see e.g., Bermuda’s
Law Reform (Misrepresentation and Frustrated Contracts) Act 1977 and Trinidad and Tobago’s
Misrepresentation Act, 1983))

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checkpoint

What are the requirements for s. 3(1) of the Misrepresentation Act, 1983 (Trinidad & Tobago)/
Bermuda’s Law Reform (Misrepresentation and Frustrated Contracts) Act 1977?

What are limitations of s. 3(1)?

What are the advantages of s. 3(1)?

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innocent misrepresentation

An innocent misrepresentation occurs where the representor has reasonable grounds to believe that the
statement is true. However, it turns out to be untrue. For example, A tells B that his car is 10 years old. B
buys the car and, a few weeks later, sells it on to C, re-stating what A had said, namely that the car is 10
years old. In such cases, the statement made by B to C is an innocent misrepresentation which may allow
C to have the contract set aside. However, damages are usually not available in cases of innocent
misrepresentation.

key statute

Misrepresentation Act, 1983 (Trinidad & Tobago)/ Bermuda’s Law Reform

(Misrepresentation and Frustrated Contracts) Act 1977, s. 3(2)

Where a person has entered into a contract after a misrepresentation has been made to him
otherwise than fraudulently, and (s)he would be entitled, by reason of the misrepresentation,
to rescind the contract, then, if it is claimed, in ay 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 ad the loss that
would be caused by it if the contract were upheld, as well as to the loss that rescission would
cause the other party.

The key differences between the common law and statutory claims are illustrated in the following table:

common law statute

burden of proof on claimant burden of proof on defendant

no contract required contract required

special relationship required no special relationship required

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 D. REMEDIES FOR MISREPRESENTATION

The remedies that are available for misrepresentation depend on the type of misrepresentation that has
occurred. Generally, there are two remedies for misrepresentation. First, a party may have the right to
rescind the contract. To rescind the contract means to set aside the contract and restore the parties to the
position they were before the contract. For example, in a case of sale of goods, the seller returns the
purchase price and the buyer returns the goods. The representee may rescind the contract whether the
misrepresentation is fraudulent, negligent, or innocent. Where the misrepresentation is not fraudulent, the
court may, at its discretion, order that the contract should not be rescinded. In such case, the affected
party may receive damages in lieu of rescission. When the representee decides to rescind the contract,
he must communicate his decision to the representor within a reasonable time. If the party who made the
representation cannot be contacted, the representee must act in a manner which sufficiently shows his or
her intention to rescind the contract.

Car and Universal Finance Co Ltd v Caldwell [1965] 1 QB 525

On 12 January, the defendant sold his car a rouge who paid by cheque. On 13 January, the
cheque bounced and the defendant immediately informed the police and the Automobile
Association. Subsequently, the rogue sold the car to an innocent third party. The car changed
hands several times before ending up in the possession of the plaintiff. It was held that when
the defendant tried to regain possession of the car by notifying the police and the Automobile
Association, he in fact rescinded the contract. From that moment onwards, the contract had
become void and no title could pass to third parties.

However, a failure to rescind within a reasonable amount of time may amount to an acceptance of the
contract and rescission may no longer be available (see Leaf v International Galleries [1950] 2 KB 86).
Similarly, a contract cannot be rescinded if it has been affirmed (see Long v Lloyd [1958] 1 WLR 753).

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In summary, the following are the limitation on the availability (so-called ‘bars to rescission’):

• affirmation (Long v Lloyd (1958));

• lapse of time (Leaf v International Galleries (1950));

• rights of third parties (Oakes v Turquand (1867); White v Garden (1851));

• impossible to restore parties to original positions (Clarke v Dickson (1858), Vigers v Pike (1842),
Head v Tattersall (1871), Armstrong v Jackson (1917));

• damages in lieu of rescission is a better remedy – arises by virtue of s. 3(2) of the

Misrepresentation Act, 1983/Bermuda’s Law Reform (Misrepresentation and Frustrated
Contracts) Act 1977

‘bars’ fraudulent negligent innocent

affirmation   

lapse of time ×  

third party rights   

impossibility  (but less stringent)  

damages in lieu of ×  
rescission – s. 2(2) of MA

the application of the bars of rescission to the different types of rescission

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Second, in the case of fraudulent and negligent misrepresentation, the person to whom a false
representation was made, may choose to claim damages in addition to rescinding the contract, or just sue
for damages. Such a claim would be made in the tort of deceit or for breach of contract.

key statute

Misrepresentation Act, 1983 (Trinidad & Tobago)/ Bermuda’s Law Reform

(Misrepresentation and Frustrated Contracts) Act 1977, s. 3(2)

Where a person has entered into a contract after a misrepresentation has been made to him
otherwise than fraudulently, 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.

A claim for damages resulting from fraudulent misrepresentation may include all losses directly
attributable to the deceit (see East v Maurer [1990] EWCA Civ 6). A claim for damages resulting from
negligent misrepresentation can include economic loss (see Esso Petroleum Co Ltd v Mardon).

innocent misrepresentation negligent misrepresentation fraudulent misrepresentation

rescission or damages rescission and/or damages

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summary of the remedies available for misrepresentation

rescission + indemnity (available for all types of misrepresentation)

note the bars to rescission:

affirmation

lapse of time

restitution impossible

intervention of third parties

discretion to award damages under s. 3(2) of the Misrepresentation Act, 1983/ Law Reform (Misrepresentation and Frustrated Contracts) Act 1977

damages

fraudulent damages here are based on the tort of deceit, that is, on causation; therefore damages are available for all loss, including consequential loss, providing that
misrepresentation there is a causative link : Doyle v Olby (Ironmongers) Ltd.; Smith New Court Securities Ltd. v Citibank NA; East v Maurer

negligent damages are based on tortious measure as found in the common law tort of negligence and thus only loss that is reasonably foreseeable may be recovered
misrepresentation provided that there is a ‘special relationship’ between the parties : Hedley Byrne & Co. Ltd v Heller & Partners Ltd.; Caparo Industries plc v Dickman and
at common law Others

burden of proof is on the representee.

damages

negligent no measure of damages specified in s. 3(1) but according to Royscot Trust Ltd v Rogerson indicated that damages here are based on the tort of deceit
misrepresentation (see above). This was questioned in Smith New Court Securities Ltd v Citibank NA and it was stated that inan action under s. 3(1) the recoverable loss does
under s. 3(1) not go beyond the consequences that arise from negligent misrepresentation – narrower than in Doyle v Olby (Ironmongers) Ltd above. Burden of proof is on
the representator to prove her was NOT negligent – a procedural advantage for the innocent party

innocent damages are not recoverable unless the court exercises its discretion under s. 3(2). Not the same measure as s. 3(1) since 3(3) states this. William Sindall plc
misrepresentation v Cambridgeshire Country Council indicates a measure that compensates a claimant ‘for the difference in value between what the plaintiff was misled into
believing that he was acquiring and the value of what in fact he received.’ Consequential losses not available.

remedies where the misrepresentation is also a term of the contract

condition damages + rescission

warranty damages only

innominate term the Hong Kong Fir test applies: has the party been substantially deprived of the whole of the benefit he would receive under the contract

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 TUTORIAL QUESTION

1. Norah places the following advertisement in the local newspaper:

For sale: The Bistro & Bar at Battlewash; turnover BDS $ 500,000 per annum.
Includes rented work-spaces for artists and writers. The bistro & bar is situated
on the sea-side of the picturesque coastal town of Battlewash, on the main tourist
route between Fridgetown and Frightown.

Ned is interested in purchasing the bistro & bar. He is not interested in the rental income from
the spaces as he will use the area for additional seating but does want to continue selling their
work.

Ned visits the premises. The bistro & bar is crowded with tourists but the space outside is empty.
He asks Norah how much of the BJS$ 500,000 turnover is down to the business from the
bistro & bar, the art sales, and rentals. Norah tells him that BJS$ 300,000 of the income is
derived from the bistro & bar sales, BJS$ 150,000 from art sales and BJS$ 50,000 from rentals.
Norah invites Ned to see her account books which are stored in the basement. He goes with
Norah but decides that he will take her word for it as the books are covered with mouse droppings
and the basement is very dusty.

Norah has not told Ned that ‘her artists’ have all now hired a space in the local village hall.
They still buy food and drink from Norah and supply her with their work.

Between seeing the café and signing the contract the planned bypass has been built around
Battlewash. This has caused a substantial fall in the amount of passing trade. Ned also finds out
that the total turnover of the business had never been more than BJS $ 250,000.

Advise Ned whether he has any potential claim against Norah on the grounds of
misrepresentation.

key resource

It is tempting to start writing immediately, but five minutes spent planning each question is well
worth spending – it may mean that you write less overall, but the quality of your answer will
almost certainly be better. The plan need not be elaborate: just jot down everything you feel is
relevant to the answer, including case names, and then organize the material into a logical
order appropriate to the question asked. It should go without saying that you should always
start the question with an introduction which sets out what you intend to cover in the question
and for what purpose. This way the examiner will see that you have thought about the
substantive issues in the question you have been asked.

An example may be found here: https://www.youtube.com/watch?v=KnWWXsfxzWI

2. Evaluate how section 3(1) of the Misrepresentation Act, 1983 (Trinidad & Tobago) provides a
potentially superior remedy for parties induced into a contract by misrepresentation, whether that
representation becomes a term of the contract or not, and even if that misrepresentation is a
statement of law.