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Law Notes Contract Law Notes

Remedies For Misrepresentation Notes

Updated Remedies For Misrepresentation Notes

Contract Law Notes

Contract Law

Approximately 1511 pages

Contract law notes fully updated for recent exams at Oxford and Cambridge. These notes cover all the LLB contract law cases and so are perfect for anyone doing an LLB in the UK or a great supplement for those doing LLBs abroad, whether that be in Ireland, Hong Kong or Malaysia (University of London).

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Remedies for Misrepresentation

Damages for consequential losses

  • Fraudulent Misrepresentation (Tort of Deceit)

    • Derry v Peak [1889]:

      • Requires C to prove D made a false statement

        • Knowingly

        • Without belief in its truth (or recognition of ignorance re: truth)

        • Recklessly, careless whether it is true or false

    • Chen Wishart: is very hard to prove deceit – but Misrepresentation Act 1967 s.2(1) helps out!

  • Negligent Misrepresentation (Tort of Negligence)

    • SEE TORT NOTES re: Hedley Byrne v Heller [1964]

  • Negligent and Innocent Misrepresentation (C can automatically claim damages as if for fraud unless D proves was not fraudulent)

    • Misrepresentation Act 1967 s.2(1)

      • When C has entered contract under misrepresentation by D and suffered loss

        • If D would be liable for damages if the misrepresentation had been made fraudulently,

          • D shall be so liable notwithstanding that statement was not fraudulent unless he proves that:

            • he had honestly and reasonably believed up to the time the contract was made

              • that the facts represented were true.

      • Howard Marine v Ogden [1964]: C’s agent non-fraudulently represented to D that barges could carry 1600 tonnes, when could only carry 1005 tonnes. D counter- claimed against C for misrepresentation.

        • Bridge LJ (maj):

          • Although D has not proved fraud

            • Under Misrepresentation Act 1967 s.2(1) Unless C can show that had reasonable ground for belief

              • Then C will still be liable

                • In this case, C cannot prove he had a reasonable ground to believe in the greater capacity.

      • Royscot v Rogerson [1991]: D misrepresented terms of hire-purchase of R to C, finance company, who wouldn’t have taken it on had known of misrepresentation. However, R wrongfully disposed of car and defaulted anyway. C sued, D argued car being wrongfully disposed not foreseeable from misrepresentation.

        • Balcombe LJ:

          • Non Fraudulent misrepresentation gives the tortious reliance damages

            • That is, putting X in the position as if he had not entered the contract

          • Wording of stature (“X shall be so liable [as if statement fraudulently misrepresented]” indicates that X is entitled to measure of damages as if under tort of deceit.

            • Therefore, damage from misrepresentation need not be foreseeable, merely direct from misrepresentation.

    • Impact of “fiction of fraud” in s.2(1) claims:

      • Damages calculated as if statement was sole reason for D entering contract

      • No remoteness limit of “reasonably foreseeable” on damages – get em all

      • Smith New Court: damages available for ALL losses due to existing flaws and loss in value after contractual formation.

      • Exempt from contributory negligence

      • Exemplary damages available

    • Criticisms:

      • Chen Wishart: Fair enough that fiction of fraud imposes liability – by why also the measure of damages?

      • Beatons: “Fools should not be regarded as rogues”

        • Tars the negligent with the brush of the fraudster

        • No measure of moral guilt while still dispensing significant damages

          • Chen Wishart: Civil Law not meant to have concern: re moral guilt – aim = only compensate C

            • Counter: Tort has similar considerations, yet has restrictions re: remoteness and causation

  • Negligent and Innocent Misrepresentation in lieu of rescission

    • Misrepresentation Act 1967 s.2(2)

      • Requires that:

        • C not be barred from rescission

          • Govt of Zanzibar v British Aerospace Ltd [2000]:

            • If C has been barred from rescission

              • Then s.2(2) won’t help them

              • This section is designed to cut back on parties using rescission where it would be inequitable to do so by awarding them damages instead.

                • S.2(1) is the place where you go to for damages for misrepresentation if you have no right to rescission in the first place.

        • Court has denied C rescission

      • Awards:

        • Sindall plc v Cambridgeshire CC [1994]:

          • Hoffmann LJ:

            • S.2(1) damages = for losses consequential to entering contract

            • S.2(2)Concerned with damage caused by the property not being what it was represented to be

              • And also to protect misrepresentor from losing whole benefit of contract where misrepresentation is both innocent and small

                • Couldn’t possibly have intended damages in lieu to be assessed on principle which would have basically same effect.

          • Evans LJ:

            • S.2(1) and s.2(2) damages are different beasts entirely

              • S.2(1) gives damages as if for fraud

              • S.2(2) gives contract measure of damages

                • Whereby C receives difference between actual value and value which property would have had

                  • if misrepresentation had been true

              • Otherwise, C would not receive his loss caused by the misrepresentation

                • since he cannot thereby rescind the contract.

        • Chen Wishart: bear in mind would not be right for C to be denied rescission b/c inequitable on D, and then hit D w/ massive damages liability instead.

        • Burrows: Evans LJ reasoning is odd

          • Why receive contract measure under s.2(2)

            • Which could potentially outstrip C’s reliance interest

              • And give greater damages than if negligent misrepresentation had been proved for a wholly innocent misrepresentation.


  • Requirements:

    • Must be communicated to the other party (especially before other party invests property in another, in which case, rescission is barred)

      • Car and Universal Finance Co Ltd v Caldwell [1965]: C entered into contract with fraudster (X), X sold car onto UFC. C communicated to police and Automobile Assistance Agency that car had been fraudulently obtained by X.

        • Lord Denning MR (affirmed CoA):

          • General principle = election to rescind does not take effect

            • Unless communicated to the other side.

          • However, this is often impossible in a case of fraud

            • In such cases, should be sufficient if...

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