Information AboutMisrepresentation |
| CATEGORIES ABOUT MISREPRESENTATION | |
| contract law | |
| english law | |
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In Contract Law , a misrepresentation is a false statement of fact made by one party to another party and has the effect of inducing that party into the contract. For example, under certain circumstances, false statements or promises made by a seller of goods regarding the quality or nature of the product that the seller has may constitute misrepresentation. A finding of misrepresentation allows for a remedy of Rescission and sometimes Damages depending on the type of misrepresentation. According to ''Gordon v Selico (1986) 18 HLR 219'' it is possible to make a misrepresentation either by words or by conduct, although not everything said or done is capable of constituting a misrepresentation. Generally, statements of opinion or intention are not statements of fact in the context of misrepresentation See ''Bisset v Wilkinson and others'' AC 177.. It should be noted though that if one party claims specialist knowledge on the topic discussed, then it is more likely for the courts to hold a statement of opinion by that party as a statement of fact See ''Esso Petroleum Co Ltd v Mardon'' [1976 2 Lloyd's Rep. 305.. REPRESENTATION IS NOT A TERM To seek a remedy under misrepresentation it must first be determined that the representation is not a term of the contract (i.e. a Warranty ). This is determined objectively by the Trier Of Fact by looking at the time that the representation was made: the closer to the moment of contract formation, the more likely it is a term. If there is any mention of the representation in writing, then it could be construed as part of the contract. As well, the Courts will often attempt to find a Collateral Contract by interpreting the representation as a promise accompanied by some sort of consideration (see ''Heilbut, Symons & Co. v. Buckleton'' {Link without Title} A.C. 30 (H.L.)). The collateral contract will have the effect of adding the representation as a term to the contract. If the representation is found to be a term then the normal remedies for Breach Of Contract apply. TYPES OF MISREPRESENTATION There are three types of misrepresentation. Depending on the type, the remedies available vary:
if a man, who has or professes to have special knowledge or skill, makes a representation by virtue thereof to another…with the intention of inducing him to enter into a contract with him, he is under a duty to use reasonable care to see that the representation is correct, and that the advice, information or opinion is reliable REMEDIES Rescission Generally, the effect of misrepresentation is that it makes the contract voidable (the representee can chose whether to affirm the contract or have it rescinded). Rescission can be done either by informing the representor or by requesting an order from the court. There are certain circumstances where rescission is not possible though. The idea behind rescission is that the parties are restored to the positions they were before entering into the contract. Therefore, if this is not possible, rescission is not an option See ''Erlanger v New Sombrero Phosphate Co'' (1878) 3 App. Cas. 308.. If the representee discovers the misrepresentation and fails to take steps to avoid the contract, then he may not be able to rescind it See ''Long v Lloyd'' 1 WLR 753. The time limit for taking such steps varies depending on the type of misrepresentation. In cases of fraudulent misrepresentation, the time limit runs until when the misrepresentation ought to have been discovered, whereas in innocent misrepresentation, the right to rescission may lapse even before the representee can reasonable be expected to know about it See ''Leaf v International Galleries'' [1950 2 KB 86.. In certain circumstances, third party rights may interfere with rescission and render it impossible. For example, if B contracts with A to sell a house with a misrepresentation and then A sells the house to C, the courts are not likely to permit rescission as that would require C to give up the house. In England and Wales, under s. 2(2) of the Misrepresentation Act 1967 , the court has the discretion so award damages instead of rescission. Damages In cases of fraudulent misrepresentation, a claim for damages is under the tort of Deceit , making the damages tortuous, in other words, only actual losses are recoverable. In certain cases though, the courts have awarded damages for loss of profit, basing it on loss of opportunity See ''East v Maurer'' {Link without Title} 2 All ER 733.. In cases of negligent misrepresentation, a claim for damages may be made either in the tort of Negligence or under s. 2(1) of the Misrepresentation Act 1967 (England and Wales). In cases of innocent misrepresentation, the court has a discretion to award damages instead of rescission. Such damages are intended to accomplish the same thing as rescission: restoration of the parties to their original positions, rather then compensate any losses. The result of this is that damages for any losses other than what was agreed to be transferred are not recoverable. SEE ALSO AUTHORITIES |
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