CONTRACT LAW

MISREPRESENTATION

Misrepresentation is a vitiating factor. Explain further.

Def of Misrepresentation

a) Statement Of Material Fact:

 Statement of opinion, statement of law, statement of future intentions, and mere sales talk
 Non-disclosure of information and silence
 Contract of good faith
 Misrepresentation by conduct

b) Statement Made Prior To The Contract

c) Inducement into the contract

 Existence of the statement
 Reliance or inducement

d) Types Of Misrepresentation:
 Fraudulent
 Negligent
 Innocent

e) Remedies:
 Recession
 Damages

Answer
Before considering the elements of misrepresentation in detail, it is first necessary to define what is
meant by misrepresentation. Misrepresentation is a statement of material facts made prior to the
contract by one party to the contract to the other, that is false or misleading ad that induces the
other party to enter into the contract. In simple words misrepresentation means an untrue
statement of fact by one party which has induced the other party to enter a contract.

When discussing about misrepresentation there are 5 elements to be satisfied under

misrepresentation. The first element is the statement of material fact, there are certain statements
that might not be treated as being statements of material fact, such as opinion, mere sales talk,
statements of future intention or conduct, and lastly the statement of law.

A false statement of opinion is not a misrepresentation as to fact. This is seen in the case of Bisset v
Wilkinson. In this case Bisset who is the land owner, represented to Wilkinson who is the person
who wanted to purchase the land for sheep farming, that if the land were properly worked they had
a carrying capacity of 2000 sheep. Both the parties knew that Bisset had not previously carried on
sheep farming on the land. Wilkinson bought the land but only paid the first instalment and refused
to pay the ret. The Bisset brought an action n for the money, Wilkinson sought to have a contract
rescinded on the ground of misrepresentation. The courts then held the decision of the trial judge
who considered that in ordinary circumstances any statement made by an owner who has been
occupying his own farm as to its carrying would be regarded as a statement of fact.

Moving on we have the sales talk, which is considered to be a statement of fact. This can be seen in
the case of Dimmock v Hallett, in this case during negotiations for the sales of some land, it was
described as fertile and improvable. The courts considered that this statement had insufficient
substance to be classed as a representation.

Moving on to the next element which is the statement of future intent, since a misrepresentation is a
false representation of material fact, it follows that as a statement that express a future intention is
speculation rather than fact, it cannot amount to a misrepresentation. This can be seen in the case of
Edgington v Fitzmaurice, in this case the claimant was a shareholder who received a circular, issued
by the directors of a company, requesting loans to the amount of 25,000 pounds with interest in
order to grow their business. However, the money was in fact to be used to pay off the company’s
debt and not to grow the business. The claimant who had taken debentures claimed repayment of
his money on the ground that it had been obtained from him by misrepresentation. The courts
therefor held that the untrue statement as to the future intention was a misrepresentation of fact.

Moving on to the last element of misrepresentation, which is the statement of law. Traditionally a
false statement of law cannot amount to a misrepresentation because there is a presumption that
everyone knows the law and therefore it cannot be falsely stated. However, since the distinction
between fact and law is not always clear cut, it can be difficult to distinguish between a statement of
law and a statement of fact. This can be seen in the case of Solle v Butcher, in this case it concerned
a house that has been converted into flats before the second world war. After the war, the
defendant leased the building with the intention to repair bomb damage and undertake other
improvements. The claimant and defendant discussed the rents to be charged after the work has
been completed. The defendant stated that the flat had become a new and separate dwelling by
reason of change of identity and was therefore not subject to the Rent Restriction Acts. This was held
to be a statement of fact and therefore actionable.

However, following Pankhania v London Borough of Hackney, it seems that a misrepresentation of

law can amount to an actionable misrepresentation. Here, the particulars of a commercial property
for sale by auction described it as being sold subject to a “license” that was terminable on the 3
months notice. The court held that this “license” was actually a tenancy and therefore was protected
under Part II of the Landlord and Tenant Act 1954. The buyer had entered into a contract to buy the
property on the representation that National Car Parks Ltd had a license that was terminable spares
on the three months notice, and was successful in his claim for damages as a result of
misrepresentation. The court held that there had been a misrepresentation as to the legal character
of the “license”

Moving into non disclosure of information and silence, it is generally said that silence cannot be
amount to a misrepresentation. This can be seen in the case of Keates v Cadogan, in this case a
landlord who was letting his house did not tell the tenant that it was in a ruinous condition. So the
courts held that the failure to disclose material information was held not to be a misrepresentation.

Following up next we have the contract of good faith.

When looking into the next part which is misrepresentation by conduct. This basically means that a
misrepresentation can be made by a conduct rather then it being in a written form or an oral form.
This can be seen in the case of Spice Girls v Aprilia World Service, when looking into the facts of this
case Aprilia who is the mop manufacturers contracted with the Spice Girls to to sponsor a concert
tour. The group had appeared in proportional material before Aprilia entered into the contract. This
contract was based on the representation made at the promotional phone call that all five members
on the band, each with their distinctive images would continue working together. Geri Halliwell left
the band sometime ago. The courts later on held that there has been misrepresentation by conduct
since the participation of all five band members in the commercial had induced Aprilia in to entering
the contract.

Next part we have the statement made prior to the contract, this basically means that
misrepresentation must be made before the contract is formed. A statement that is made after the
formation of the contract cannot be actionable. This can be clearly seen in the case of Roscorla v
Thomas, in this case the claimant bought a horse from the defendant. After buying the horse the
defendant told the claimant that the horse was free from vice. However in truth the horse had a very
bad temper and was vicious. The claimant subsequently found out and sued the defendant for
breach of contract. the courts then held that the claimant failed to prove breach of contract, and that
the defendants statement was made after the sale was completed and there was no consideration
for it to become a binding contractual warranty.

Next moving into the inducement into the contract, this basically means that the statement must be
an inducement to the other party to enter into the contract. Firstly we have the existence of the
statement, this is when the misrepresentation must be made to the party that was misled. This can
be seen in the case of Peek v Gurney. Moving onto the next part of the inducement into the contract
which is the reliance or inducement. This is where the claimant must actually have relied upon or
acted upon the representation. This can be seen in the case of Attwood v Small, in this case the
defendant sold mines and steelwork to the claimant. Prior to the sale, defendant made
representations about the capabilities of the property and the claimant agreed to purchase subject
to verifying those statements. The claimants agents verified that they were true but they were later
revealed to be false. The claimant sought recession of the contract. therefore the courts held that
the claimants recession was denied.
There are 3 types of misrepresentation, firstly we have innocent misrepresentation, secondly we
have negligent misrepresentation, and lastly we have fraudulent misrepresentation. Fraudulent
misrepresentation can be clearly seen in the case of Derry v Peek. In this case a companies
prospectus stated that its tramways had the right to use steam power when it did not due to a lack of
consent from the Board Of Trade. The claimant bought shares relying on the prospectus. The
company was wound up and its directors were sued for damages in the tort of deceit.