This is an extract of our Misrepresentation Pq Notes document, which we sell as part of our Contract Law Notes collection written by the top tier of Oxford students.
The following is a more accessble plain text extract of the PDF sample above, taken from our Contract Law Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:
This section deals with statements made in negotiations, namely misrepresentations, and mistakes (though non-disclosure may also give rise to liability).
PQ approach in summary
EXAM TIP: Separate between different statements. Do not oscillate between different statements.
STEP 1: Determine if statement is a term of contract. If yes, has contract been breached. If no, move to step 2.
STEP 2: Is statement a collateral warranty? If yes, has it been breached? If not move to step 3.
STEP 3: statement is a representation. Is it a misrepresentation? If no, stop here. If yes,
move to step 4.
STEP 4: has liability been excluded/limited successfully? If yes, stop here. If not, move to step 5.
STEP 5: what remedies are available?
1 Is it a term of the contract?
NB. If there is an entire agreement clause on the facts, the representation is likely not a term of the contract.
If the representation is also incorporated as a term of the contract, the representor is liable,
and the innocent party has remedies, for both misrepresentation and breach of contract. s 1,
Misrepresentation Act 1967: "Where a person has entered into a contract after a misrepresentation has been made to him, and - (a) the misrepresentation has become a term of the contract; or (b) the contract has been performed; or both, then, if otherwise he would be entitled to rescind the contract without alleging fraud, he shall be so entitled, subject to the provisions of this Act, notwithstanding the matters in paragraphs (a) and (b) in this section."
However, remedies cannot be simultaneously asserted if mutually inconsistent, for e.g.
rescission for misrepresentation and damages for breach of contract. 2 If not, is it a mere representation, or a collateral warranty?
Esso v Mardon: a collateral warranty arises where there is (1) an intention on behalf of both parties for the promise to become a collateral contract, (2) consideration - which is the reliance on the promise by the representee to enter the main contract. Hence, representee can sue for breach of the promise.
NB. If there is a clause which says "no pre-contractual assurance is a warranty", no collateral warranty will arise in PQ.
2 If representation, is it a misrepresentation?
A misrepresentation cannot be a mere "puff".
What are mere puffs? Apply cases analogously
Dimmock v Hallett: An auction catalogue made several statements about the land,
one of which being that it was "fertile and improvable". Held, no misrepresentation. This was a mere general statement…a mere flourishing description by an auctioneer.
However, if the statement is sufficiently specific it will not be a mere puff. This depends on the facts. Carlill v Carbolic Smoke Ball: D made the following advertisement, "that "100l. reward will be paid by the Carbolic Smoke Ball
Company to any person who contracts the iufluenza after having used the ball three times daily for two weeks according to the printed directions supplied with each ball", "1000l is deposited with the Alliance Bank, shewing our sincerity in the matter". Held, no mere puff. Intended to be a promise. Fact that money had been deposited and sincerity shown was proof that not a mere puff.
PQ approach: depends on the facts. For e.g., in the PQs, if D makes an exaggerated statement,
that's a mere puff.
Definition: A material false representation of fact or law, addressed to the claimant, which induced her entry into the contract.
1) A representation may arise by words or conduct
Representation can be by conduct (Spice Girls v Aprilia). Where conduct comprises a series of representations, they must be looked at in totality: in sum, does the conduct, as a whole, give rise to a representation? Spice Girls v Aprilia World
Service: "Whilst it is necessary to give each episode separate consideration it is also necessary to have regard to their cumulative effect. This is not a case of an isolated representation made at an early stage of ongoing negotiations. It is the case of a series of continuing representations made throughout the two months' negotiations leading to the Agreement. Later representations gave added force to the earlier ones; earlier representations gave focus to the later ones".
Can a representation arise by non-disclosure?
If the non-disclosure is a pure non-disclosure, the general rule is caveat emptor Robbins v Jones.
But non-disclosure may sometimes give rise to misrepresentation if it occurs in the following circumstances.
In the context of an express statement. Cassa di Risparmio v Barclays Bank: (1)
"Silence by itself cannot found a claim in misrepresentation." (2) "But an express statement may impliedly represent something. For example, a statement which is literally true may nevertheless involve a misrepresentation because of matters which the representor omits to mention."
In the context of continuing conduct. Spice Girls Ltd v Aprilla World Service: A
party's misleading conduct can constitute a misrepresentation, even in the absence of an express statement. On the facts, the Spice Girls' preservation of an appearance of unity by participating in photo shoots, despite knowing that one of their number would be leaving the band quite soon, was a misrepresentation that the band was not about to change its membership in this way.
In the context of conduct. Gordon v Selico: A vendor's decision to cover up dry rot in a property in order to conceal this problem from prospective purchasers and their surveyors was a misrepresentation by conduct.
After that, same rules apply: must be materially false, addressed to C, induces C to enter contract.
2) Addressed to the claimant 3) Representation must be about a fact or law
Statements of law which are false can be misrepresentations: Brennan v Bolt Burdon A statement of one's intention is a statement of fact, since the state of one's intention is a fact: Edgington v Fitzmaurice.
Cf. Kleinwort v Malaysia Mining (1989): There was no misrepresentation here as at the time it was actually the intention or policy of D to financially support the subsidiary. The fact that they later changed their mind did not falsify the statement at the earlier stage.
What about statements of opinion? Smith v Land & House Property Co: Statements of opinions amount to statements of facts where the facts are not equally known to both sides; this is because the statement of opinion by the party who is in the know impliedly states that he knows facts which justifies his opinion. On the facts, D, a seller of freehold property, stated that the property was let to a "most desirable tenant". This was a statement of fact. "if the landlord says that he considers that the relations between himself and his tenant are satisfactory…this is a statement on a subject as to which primâ facie the vendors know everything and the purchasers nothing… [it] 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."
Smith v Land & House Property Co: concerning statements of opinion, there is a disparity of knowledge between landlord and purchaser as to the tenant. Bisset v Wilkinson: no disparity of knowledge between vendor and purchaser as to how many sheep a farm could carry, equal expertise.
The representor may also emphasise that he has no intention to make an actionable statement,
like in IFE Fund SA v Goldman Sachs.
4) The representation must be false
Avon Insurance v Swire Fraser: "[A] representation may be true without being entirely correct, provided it is substantially correct and the difference between what is represented and what is actually correct would not have been likely to induce a reasonable person in the position of the claimants to enter into the contracts."
It is unclear what the position of the law is when an initially accurate statement is rendered inaccurate by a change of circumstances. There are several possible positions:
(i) Representor becomes liable if he discovers the change in circumstances before the contract's formation but fails to correct his earlier statement. This can be analysed as a breach of a continuing implied representation that the representor honestly continues to believe his statement.
Romer LJ, With v O'Flanagan (1936): The representor becomes liable if he discovers the change before the contract's formation but fails to correct his earlier statement.
This element of bad faith has been supported elsewhere.
Field J, Erlson v Hampson (2011): It is sufficient that the representor knows that there has been a change; there is no further requirement that A should know that there is a legal duty to correct the false impression.
Sir Andrew Morritt V-C, Spice Girls; Lewinson J, Foodco v Henry Boot (2010):
Assumed that this approach was the right one.
(ii) Representor becomes liable only if he ought reasonably to have discovered the change of circumstances
S. 2(1), Misrepresentation Act1967: A duty is imposed on the representor to keep under review, at least to a reasonable extent, the veracity of his statements. In the absence of reasonable ground, the representor would become liable if a precontractual change of events had falsified the earlier statement.
Treitel: Supports this position, argues that it should not be limited to situations of actual knowledge but also situations where D should have realised that what he said had become false.
Strict liability: the representation is deemed to continue (i.e. deemed to be repeated)
until the contract is formed, so it can automatically be falsified by a change of circumstances, whether or not the representor had any control over these events, and irrespective of his awareness of the relevant change
Lord Wright MR, With v O'Flanagan
Cartwright: It should not depend on the representor's knowledge or perspective at all, and the fact that the true statement is falsified later should suffice for liability.
A niche point. The representation should be afforded its usual meaning and should be interpreted in their context; if the representee's interpretation of the representation departs from this, then the representation is not false: EA Grimstead v McGarrigan. E was purchasing shares from M's company. M represented that B's assets and liabilities would balance, and that the monies owed by the company did not exceed £10,000. Held: this representation was plainly correct if made and understood in what may be described as the usual sense applicable in discussions as to the value of a company on the basis of its financial statements. It would be incorrect if construed literally. No misrepresentation.
5) The representation must have induced the representee to enter into the contract (though there is an exception to this if the statement was made fraudulently).
Per Zurich Insurance v Hayward:
(1) It is sufficient for the misrepresentation to be an inducing cause and that it is not necessary for it to be the sole cause
Buy the full version of these notes or essay plans and more in our Contract Law Notes.