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Misrepresentation 1 Actionability Notes

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A more recent version of these Misrepresentation 1 Actionability notes – written by Cambridge/Bpp/College Of Law students – is available here.

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CONTRACT LAW MISREPRESENTATION 2: CATEGORIES AND REMEDIES

A misrepresentation is a false statement of fact or law.

MERE PUFF is not an actionable statement in misrepresentation. TERMS are actionable for breach of contract and misrepresentation. REPRESENTATIONS are only actionable in misrepresentation if they are false. There is a criteria that a statement must fulfil in order to be actionable, i.e. capable of fulfilling a court action for misrepresentation. If one of the elements is missing, the misrepresentation will not be actionable and there will be no remedy. An actionable misrepresentation is an unambiguous false statement made to the claimant which induces the claimant to enter into the contract with the statement maker. In order for a misrepresentation to be actionable it must be: 1) Unambiguous 2) False 3) A statement of fact or law 4) Addressed to the misled party 5) Material and induces claimant to enter into the contract 6) The cause of a loss

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UNAMBIGUOUS: No liability if claimant has placed an unreasonable construction on the representation (MCINERNY V LLOYDS BANK LTD) FALSE: Statement must be substantially incorrect (AVON INSURANCE PLC V SWIRE FRASER LTD) STATEMENT OF LAW: false statement of law is actionable for misrep (PANKHANIA V HACKNEY LBC) STATEMENT OF FACT
? Statement of fact is a statement asserting a given state of affairs (KLEINWORT BENSON V MALAYSIA MINING CORP)
? Statement of fact through words or conduct (GORDON V SELICO, SPICE GIRLS V APRILLA)
? Statement of opinion is not a statement of fact (BISSETT V WILKINSON) Exception: Opinion given by someone with greater knowledge than C (SMITH V LAND AND HOUS PROPERTY) Exception: Opinion given by an expert (ESSO PETROLEUM V MARDON)
? Statement of future intention is not a statement of fact (BEATTIE V EBURY) Exception: Dishonest statements made with no intent to follow through (EDGINGTON V FITZMAURICE)
? No duty to inform other party of change of intention (WALES V WADHAM)
? Silence is not a statement of fact (KEATES V EARL OF CADOGAN, SYKES V TAYLOR-ROSE) Exception: Half-truths (DIMMOCK V HALLETT, NOTTS PATENT BRICK & TILE V BUTLER) Exception: Continuing representation (WITH V O'FLANAGAN) Exception: Uberrimae Fidei (HOOD V WEST END MOTOR) ADDRESSED TO THE MISLED PARTY: directly or through a third party (COMMERCIAL BANKING CO. OF SYDNEY V RH BROWN & CO.) MATERIALITY + INDUCEMENT
? Material= inducement (SMITH V CHADWICK) Exceptions: D can prove C was not subjectively induced (MUSEPRIME V ADHILL)
? Immaterial = no inducement Exceptions: C can prove they were induced - subjective (MUSEPRIME V ADHILL)
? Misrep need not be the only inducement (EDGINGTON V FITZMAURICE)
? Misrep must be one of the inducements (JEB FASTNERS V MARKS BLOOM)
? No inducement where C did not hear/see misrep (HORSFALL V THOMAS)
? No inducement where claimant did not rely on misrep (SMITH V CHADWICK)
? No general duty for C to investigate (REDGRAVE V HURD) Exception: more commercial contracts may reasonably require investigation (SMITH V ERIC S. BUSH)
? Partial reliance on misrep is sufficient where C has investigated (EDGINTON V FITZMAURICE)
? No inducement if C relies on their own investigation (ATTWOOD V SMALL)
? Investigation is ignored if misrep is fraudulent (S.PEARSON V DUBLIN CORP)

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REPRESENTATIONS, TERMS AND MERE PUFF RULE

CASE DIMMOCK V HALLETT

1) MERE PUFF A statement with no legal force whatsoever. Mere puff is not a representation and will not qualify as a misrepresentation.

Vendor of land made two statements: 1) The land was fertile and improvable. 2) All of the farms on the land had been fully let. Although the farms were all let at the time the statement was made the tenants had given in their notice quit. HELD: Statement 1 was just mere puff. Statement 2 was a misrepresentation by half-truth.

2) TERM

J.EVANS & SONS V ANDREA MERZARIO

A statement that is a contractual promise. A representation may become a term if the court decides it is incorporated into the contract.

P had goods transported by D for a long time. Goods were always transported on deck. D wanted to change to containers. P agreed, as long as they were still stored below deck - D agreed to do this, but did not and goods were lost.

If the representation is a term, there are potential claims for breach of contract and misrepresentation.

HELD: The oral promise was a binding term that formed part of the contract. D gave the oral promise to induce the P to continue to do business with the company. The rest of the transaction continued on the basis of that promise.

3) REPRESENTATION A statement of fact. A false representation will give rise to a claim in misrepresentation if it is actionable.

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ELEMENTS OF AN ACTIONABLE MISREPRESENTATION - ALL MUST BE PROVEN 1)

UNAMBIGUOUS

RULE

CASE MCINERNY V LLOYDS BANK LTD

There can't be any doubt as to what the statement means. The representor will not be liable if the representee has placed an unreasonable construction on the representation.

C wasn't going to do business with Mackay unless Mackay's bank provided a guarantee. D wrote to C stating that they couldn't provide a guarantee and the arrangements 'should be sufficient' for C's purposes. Mackay did not pay and C sued D on the basis that the letter was a negligent misrepresentation which suggested that D would step in and pay Mackay's liabilities. HELD: C had placed his own interpretation on the letter which on a reasonable construction did not give the assurances that C had asked for. The statement was not a guarantee, it was ambiguous and was not a misrepresentation.

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3)

STATEMENT OF FACT OR LAW

RULE

CASE

EXCEPTIONS

CASE

PANKHANIA V HACKNEY LBC Statement of law: a status about the legal status of someone/something. A misrepresentation of law may be actionable.

Buyer of a car park was told by Hackney LBC that the car park was let out to a tenant on a contractual licence. In fact, it was occupied under a protected tenancy pursuant to the Landlord & Tenant Act 1954. HELD: The legal status of the tenancy had been misrepresented - misrepresentation of law.

Statement of fact: a statement asserting a given state of affairs, not an undertaking to do or not do something.

KLEINWORT BENSON LTD V MALAYSIA MINING CORP C lent a subsidiary of D money on the basis that D wrote a letter stating 'it is at all times our policy to ensure that our subsidiaries can meet its liabilities'. Subsidiary goes under and C sues D on the basis of that statement. D said it was their policy, but isn't any longer. HELD: It was a statement of fact at the time and not a contractual promise - no claim for breach. Also no claim for misrepresentation because the statement was true when it was made, they'd just changed their Page

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