Transcript Chapter 22
Chapter 22 Misrepresentation GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL • Already looked at when “representations” may become terms of a contract • Now have to look, in a wider sense, at the effect on contracts of misrepresentation in the tortious sense. GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL • A representation is a statement of a material fact (or sometimes an opinion) made by one party to another during negotiations intended to and actually inducing the other to enter into the contract. • If it is false, it is a misrepresentation GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL • It has to be a statement. But sometimes silence can be a statement in certain circumstances. This is usually rare but can occur in three ways. GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL • First, if there is a failure to inform of changed circumstances this can count. So, in With v O’Flanagan (1936) a doctor stated in negotiation that his practice pulled in £2,000 a year, but failed later to inform the potential purchaser when he later got sick, this dropped to £5! GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL • Second, if the contact requires utmost good faith disclosure, silence can be a misrepresentation (such as insurance contracts). GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL • Third, a half-truth can be misrepresentation such as putting beauty board up to hide damp. In Nottingham Patent Brick and Tile Co v Butler (1886) a solicitor said he was not aware of any restrictive covenants affecting a particular piece of land. He didn’t say he had just not read the title documents and this counted as a misrepresentation! GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL • Usually need a statement of fact • Opinion can count if person making it is in the best position to form an opinion – Esso Petroleum v Marsden • Oil Co rep told propspective garage owner about expected sales levels of a location • Actionable – represented that this was being done with skill and care in calculating the figure • Had he said it was a guess, would be different. GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL • Bissett v Wilkinson – Rep that land would take 2000 sheep – Not actionable – Made it clear was his opinion only – Pr aware Vr had no special knowledge or skill GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL Statements of Intention • Can a statement of future intention be a statement? • Edington v Fitzmaurice (addition) – Prospectus stated its object of issuing debentures was to complete alterations to buildings. – Not true – D claimed this was only a statement of intention, not of fact and only the intention was not carried out – CA rejected – Bowen LJ • “A misrepresentation as to the state of a man’s mind is…a misstatement of fact” GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL The Seaflower (addition) • Owners of ship said they would obtain approval of a particular oil company within 60 days. • Charterers of ship claimed this a misrep – should have known (or did know) they wouldn’t get the approval. • Ct held that this was just a statement of intention, not fact… GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL • Must INDUCE party to enter the K so if you don’t rely on it, no claim. – Attwood v Small – statement about potential of mine wrong, but buyer had commissioned his own survey… GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL The Kinds of Misrepresentation • An innocent misrepresentation is one that is neither negligent nor fraudulent. • A fraudulent misrepresentation is one that is made knowing it is false or made recklessly as to whether it is true or false. Can get damages in tort in deceit • A negligent misrepresentation is one made without reasonable grounds for the belief. Can get damages on Hedley Byrne GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL Consequences - Recission • May be able to set aside contract for misrep – purely discretionary as equitable • When can you rescind for misrep? • It depends on whether the misrep is innocent or fraudulent/negligent. GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL If Innocent • Contract must not yet have been executed • Legge v Croker – Sale of land – said no public right of way – wrong – Emerged after sale completed – therefore contract executed – could not rescind – Sale of Goods Act, 1980 limits this rule – s.44…. • This rule does not apply if misrep is not innocent – but the rest of the rules apply even if it is innocent…. GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL If Fraudulent or Negligent • Don’t have the rule that cannot operate if contract executed… • Affirmation – Learn of the misrep, and proceed on – taken to have affirmed the K – Re Hop and Malt Exchange and Warehouse Co • Bought shares – misleading prospectus – learned of it – continued to deal with shares – taken to hav treated K as subsisting GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL • Delay – Leaf v International Galleries • Innocent misrep about artist and painting • Sought rescission 5 years later – lapse of time made it inequitable to rescind – May be different if F or N Misrep • O’Kelly v Glenny – Solicitor lied about value of estate – heiress sold it – 10 years later – sued for R – had transaction set aside GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL • Effect on Third Parties – If it would effect a bona fide third party who purchased for full value? – White v Garden • D sold iron to A – A resold to P – A paid by forged bill of exchange – D seized iron in P’s possession • Clear F misrep – rescind K? No…effect of recission would have been to deny P the ownership of goods it got in good faith and for full value GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL If not possible • If it is impossible to restore parties to original position – wont get R • Vigers v Pike – Subject was a mine – Rec sought when the mine was fully worked out. – Could not be restored to pre-K positions. GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL Recision and the SOGASOSA, 1980 • Rule – innocent mispre gives no right to recission where contract executed – S.44, 1980 – K for sale of letting or HP of goods or services – can sue on innocent misrep for recission even though K has been performed. – You need to show the misrep was a term of the K though – i.e. Oscar Chess etc. – Quite limited – court may allow K to subsist and order payment of monies etc GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL Misrep and Disclosure • The idea here is that in some cases silence (i.e. failing to say something) can amount to a misrep – which may entitle one to recission. • Simple logic – you don’t say something, your silence intimates that the “something” doesn’t exist GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL • Silence can be misrep if the K is one which required uberrimae fides – duty to disclose in such cases • Insurance is the big deal here • Principle – insurer knows nothing, insured knows everything…should disclose it all • If you don’t, Ins can avoid K – pay back premia • Rule set out in Carter v Boehm – all material facts to be disclosed • Sometimes statute intervenes GRIFFITH COLLEGE PROFESSIONAL LAW SCHOOL