Misrepresentation
Introduction
During the negotiations leading to the formation of a contract, many things are
said. Some will be mere sales puffs, which have no legal effect; others will be
representations (that is, statements of opinion, which may not become terms of
the contract, or statements made by one party which may have induced the other
party to enter into the contract), others will become terms of the contract.
The distinction between representations and terms is important because each
gives rise to different remedies for breach.
The intention of the parties determines whether a statement is a term or a
representation. Factors that will be considered in examining their intention are the
timing and importance of the statement and the relative knowledge of the parties
(see previous lecture for the difference between terms and representations).
What is Misrepresentation?
A misrepresentation is an untrue statement of fact by one party, which has
induced the other party to enter into the contract.
I. What are the necessary elements for an Actionable Misrepresentation?
For a misrepresentation to be actionable it must fulfil three requirements:
1. There must be an untrue statement
2. It must be a statement of fact, not mere opinion
3. It must have induced the innocent party to enter the contract.
1. Untrue statement
An untrue statement of fact must have been made by the other contracting party,
or the other contracting party must have known of the untrue statement. The
statement may be in any form – spoken, written or by conduct.
Spice Girls Ltd v Aprilia World Service BV (2002)
Silence: Under the traditional rule of ‘caveat emptor’ (let the buyer beware), a
purchaser is required to ask questions about important matters if necessary – the
1
, seller is not usually expected to volunteer information which may put the buyer
off.
Fletcher v Krell (1873)
But note that there are a number of exceptions to this rule!
- Where the contract is a contract of the utmost good faith (uberrimae fidei) or
deals with certain other fiduciary relationships (examples are insurance contracts
or partnership matters).
International Management Group UK Ltd v Simmonds (2003)
- Where a party makes a statement that is true when it is made, but before the
contract is made the circumstances change so that the statement is no longer true.
In this situation, the party who made the statement has a duty to tell the other
party about the change and failure to do so will amount to a misrepresentation.
With v O’Flanagan (1936)
Spice Girls Ltd v Aprilia World Service BV (2002)
- If one party makes a statement which is itself true but distorts the whole
situation because of what is left unsaid, the statement may amount to
misrepresentation. This exception often arises in practice.
Dimmock v Hallett (1866)
2. The statement must be a fact
The statement must be one of fact; merely delivering an opinion will not create
an actionable misrepresentation.
Bissett v Wilkinson (1927)
There are some cases in which what looks like a statement of opinion will be
considered by the courts to be a statement of fact. An example is where one party
falsely states their opinion.
For example, Ann wants to sell a clock to Ben and says she thinks the clock is
200 years old, when in fact she knew it was made a month before. Her state of
mind is a fact, and she is lying about it; therefore she is making a
misrepresentation of fact.
Edgington v Fitzmaurice (1885);
2
Introduction
During the negotiations leading to the formation of a contract, many things are
said. Some will be mere sales puffs, which have no legal effect; others will be
representations (that is, statements of opinion, which may not become terms of
the contract, or statements made by one party which may have induced the other
party to enter into the contract), others will become terms of the contract.
The distinction between representations and terms is important because each
gives rise to different remedies for breach.
The intention of the parties determines whether a statement is a term or a
representation. Factors that will be considered in examining their intention are the
timing and importance of the statement and the relative knowledge of the parties
(see previous lecture for the difference between terms and representations).
What is Misrepresentation?
A misrepresentation is an untrue statement of fact by one party, which has
induced the other party to enter into the contract.
I. What are the necessary elements for an Actionable Misrepresentation?
For a misrepresentation to be actionable it must fulfil three requirements:
1. There must be an untrue statement
2. It must be a statement of fact, not mere opinion
3. It must have induced the innocent party to enter the contract.
1. Untrue statement
An untrue statement of fact must have been made by the other contracting party,
or the other contracting party must have known of the untrue statement. The
statement may be in any form – spoken, written or by conduct.
Spice Girls Ltd v Aprilia World Service BV (2002)
Silence: Under the traditional rule of ‘caveat emptor’ (let the buyer beware), a
purchaser is required to ask questions about important matters if necessary – the
1
, seller is not usually expected to volunteer information which may put the buyer
off.
Fletcher v Krell (1873)
But note that there are a number of exceptions to this rule!
- Where the contract is a contract of the utmost good faith (uberrimae fidei) or
deals with certain other fiduciary relationships (examples are insurance contracts
or partnership matters).
International Management Group UK Ltd v Simmonds (2003)
- Where a party makes a statement that is true when it is made, but before the
contract is made the circumstances change so that the statement is no longer true.
In this situation, the party who made the statement has a duty to tell the other
party about the change and failure to do so will amount to a misrepresentation.
With v O’Flanagan (1936)
Spice Girls Ltd v Aprilia World Service BV (2002)
- If one party makes a statement which is itself true but distorts the whole
situation because of what is left unsaid, the statement may amount to
misrepresentation. This exception often arises in practice.
Dimmock v Hallett (1866)
2. The statement must be a fact
The statement must be one of fact; merely delivering an opinion will not create
an actionable misrepresentation.
Bissett v Wilkinson (1927)
There are some cases in which what looks like a statement of opinion will be
considered by the courts to be a statement of fact. An example is where one party
falsely states their opinion.
For example, Ann wants to sell a clock to Ben and says she thinks the clock is
200 years old, when in fact she knew it was made a month before. Her state of
mind is a fact, and she is lying about it; therefore she is making a
misrepresentation of fact.
Edgington v Fitzmaurice (1885);
2
