Misrepresentation
Misrepresentation is the area of law concerned with a defendant’s liability for false
statements of fact, reliance on which as led to financial loss on the part of the claimant
Must be a statement of fact – not opinion or intention
Most cases of misrepresentation arise from things said or done during the course of business
negotiations leading up to a formal contract. The basic problem is that business-people may
say things during the course of negotiations leading up to a contract. These statements will
induce one party to enter into the contract, such as statements about a quality of a product,
but they may not be included in the contract as formal terms
Because such statements may not take effect as terms of the contract, a claimant is not able
to sue for breach of contract is the statement turns out to be untrue – but they may be able
to claim misrepresentation.
Elements of misrepresentation:
• English law recognises no general duty of disclosure of material facts – Smith v Hughes
• There are exception with business to consumer contracts – but we will not deal with
the exceptions here
• Also known as the “Caveat emptor” – buyer beware
• However, if a contractor chooses to divulge information, it must be accurate and
liability in misrepresentation may occur if the information provided turns out to be
false
• There are 2 elements needed:
1. A false statement of fact
2. Which induced the other party to enter into a contract
1
, Misrepresentation
1. False statement of fact – not a statement of opinion or intention
a. Fact or opinion?
i. Bisset v Wilkinson (1927) – Bisset owned 2 plots of land which is agreed to
sell to Wilkinson. Bisset said the land could hold 2000 sheep but it couldn’t.
Bisset not liable as this was a statement of opinion as Bisset expressed an
opinion and wasn’t an expert in this field
ii. Esso Petroleum v Mardon (1976) – Esso gave an estimate to Mr. Mardon
to the amount of petrol he could sell. CoA held that there was no
misrepresentation as it was a statement of opinion but could recover
damages due to negligent misstatement. Esso had the relevant knowledge
and skill to provide a correct estimate, but didn’t
Need the relevant knowledge and skill
b. Fact or Intention?
i. Edgington v Fitzmaurice (1885) – C purchased shares in D’s company. The
company prospectus said the money was to expand, but instead it was
used to pay the company debts
Held – despite the fact the statement related to a statement of future
intent, and someone is allowed to change their mind, D was liable because
he incorrectly expires the intention
ii. Wales v Wadham (1977) – if a statement of intention is true at the time it
does not mean it is a fact
c. Continuing accuracy of statement of fact:
i. With v O’Flanagan (1936) – C was induced to buy D’s medical practice by
D’s statement that it made £2000 per year. This was true at the time, but
D became ill and many patients went elsewhere and the practice become
worthless by the time of the sale.
Held – where there is a change of circumstances, there is an obligation to
inform the other party
2
Misrepresentation is the area of law concerned with a defendant’s liability for false
statements of fact, reliance on which as led to financial loss on the part of the claimant
Must be a statement of fact – not opinion or intention
Most cases of misrepresentation arise from things said or done during the course of business
negotiations leading up to a formal contract. The basic problem is that business-people may
say things during the course of negotiations leading up to a contract. These statements will
induce one party to enter into the contract, such as statements about a quality of a product,
but they may not be included in the contract as formal terms
Because such statements may not take effect as terms of the contract, a claimant is not able
to sue for breach of contract is the statement turns out to be untrue – but they may be able
to claim misrepresentation.
Elements of misrepresentation:
• English law recognises no general duty of disclosure of material facts – Smith v Hughes
• There are exception with business to consumer contracts – but we will not deal with
the exceptions here
• Also known as the “Caveat emptor” – buyer beware
• However, if a contractor chooses to divulge information, it must be accurate and
liability in misrepresentation may occur if the information provided turns out to be
false
• There are 2 elements needed:
1. A false statement of fact
2. Which induced the other party to enter into a contract
1
, Misrepresentation
1. False statement of fact – not a statement of opinion or intention
a. Fact or opinion?
i. Bisset v Wilkinson (1927) – Bisset owned 2 plots of land which is agreed to
sell to Wilkinson. Bisset said the land could hold 2000 sheep but it couldn’t.
Bisset not liable as this was a statement of opinion as Bisset expressed an
opinion and wasn’t an expert in this field
ii. Esso Petroleum v Mardon (1976) – Esso gave an estimate to Mr. Mardon
to the amount of petrol he could sell. CoA held that there was no
misrepresentation as it was a statement of opinion but could recover
damages due to negligent misstatement. Esso had the relevant knowledge
and skill to provide a correct estimate, but didn’t
Need the relevant knowledge and skill
b. Fact or Intention?
i. Edgington v Fitzmaurice (1885) – C purchased shares in D’s company. The
company prospectus said the money was to expand, but instead it was
used to pay the company debts
Held – despite the fact the statement related to a statement of future
intent, and someone is allowed to change their mind, D was liable because
he incorrectly expires the intention
ii. Wales v Wadham (1977) – if a statement of intention is true at the time it
does not mean it is a fact
c. Continuing accuracy of statement of fact:
i. With v O’Flanagan (1936) – C was induced to buy D’s medical practice by
D’s statement that it made £2000 per year. This was true at the time, but
D became ill and many patients went elsewhere and the practice become
worthless by the time of the sale.
Held – where there is a change of circumstances, there is an obligation to
inform the other party
2
