Professional Documents
Culture Documents
Worksheet 2
Misrepresentation
GENERAL
A Statement can include conduct
Gordon v Selico Co Ltd
Facts
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The D knew that the flat was in bad condition and had dry rot
The D arranged for the dry rot to be painted over. At the time of viewing the
flat no dry rot was evident.
Held
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Whether the covering up of the dry rot with fresh paint amounted to a
statement
D had taken a positive action in employing the painters to cover up the dry rot
Held
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The claimant must prove that the defendant has made a clear representation of
present fact. But the representation may be either express or implied from
conduct
A defendant who has made a statement that was true at the time it was made is
bound to correct it if, after it is made, but before the parties enter into the
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contract in question, the statement is falsified by events to the defendant's
knowledge. A representation is said to be continuing.
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Promises v Representations
Kleinwort Benson Ltd. v Malaysia Mining Corporation Berhad
Facts
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The C bank agreed with the Ds to make a loan facility of up to 10m available
to the Ds wholly owned subsidiary which traded tin.
In 1985, the tin market collapsed and the subsidiary went into liquidation
owing the C bank the whole loan.
The C brought an action against them, and the trial judge held that the C was
entitled to recover.
Held
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On the facts, the letter of comfort was in terms a statement of present fact and
not a promise as to future conduct and in the context in which the letters were
written was not intended to be anything other than a representation of fact
giving rise to no more than a moral responsibility on the part of the defendants
to meet the subsidiarys debt.
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PART A
Definition of an Operative Misrepresentation
This untrue statement of fact or law is made to the other party to the contract who is referred
to as the representee.
1. Untrue Statement
a. Mere puff
Dimmock v Hallet
Facts
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The estate included three parcels of land on of which was the Bull
Hassocks Farm.
The advertisement for the auction described the Bull Hassocks Farm as
having "fertile and improvable land", and described in the particulars
that each parcel was let out to paying tenants.
However, it was not mentioned that the tenants had, by the time of the
auction, already given notice to quit the property.
Held
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Although the statement about the land being "fertile and improvable"
was merely a "flourishing description" and did not entitle the buyer to
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rescind, telling only a half truth about the tenants constituted good
grounds for unwinding the contracts.
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Tenants rent: Even the representation that the farm had been let to
Hickson at 290 15s. was not correct. He had occupied it for a year and
a quarter, paying only 1 for the first quarter; and this took place at a
time of year when the occupation must have been beneficial; for the
farm contained about 150 acres of pasture, which Hickson thus held at
a nominal rent from Midsummer to Michaelmas. I am of opinion,
therefore, that the particulars contain representations which were
untrue, and calculated materially to increase the apparent value of the
property. The Court requires good faith in conditions of sale, and looks
strictly at the statements contained in them.
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led to believe that the tenants of the other lots were continuing. This
again, as it seems to me, is a material misrepresentation.
With v OFlanagan
Facts
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During the course of negotiations for the sale of a medical practice, the
vendor made representations to the purchaser, about the existing nature
of the practice which, by the time when the contract signed were
untrue.
The value of practice which, by the time the contract was signed were
untrue.
The value of the practice had declined in the meantime because of the
vendors inability to attend to it through illness.
Held
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If a statement has been made which true at the time, but which during
the course of negotiations becomes untrue, then the person who knows
that it has become untrue is under an obligation to disclose to the other
the change in circumstances.
b. Opinion
Bisset v Wilkinson - a mere opinion is not a representation
Facts
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The C purchases from the D two blocks of land in NZ for the purpose
of sheep-farming.
During negotiations the appellant told the C that the land could hold
2000 sheep;
As both parties were aware the land had not at any time carried on
sheep-farming on the land.
Held
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C had advertised that it was let to Fleck, "a most desirable tenant".
D agreed to buy the hotel. However, Fleck, who had been overdue with
rent, went bankrupt just before transfer of title.
Held
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If the facts are not equally known to both sides, then a statement of
opinion by the one who knows the facts best involves very often a
statement of a material fact, for he impliedly states that he knows facts
which justify his opinion.
The landlord "avers that the facts peculiarly within his knowledge are
such as to render that opinion reasonable."
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c. Intention
Wales v Wadham
Facts
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D had stated on several occasions before the contract she would never
remarry.
Held
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The wife made an honest statement of her intention which was not a
representation of fact, and there is no basis for holding that D was
under a duty in the law of contract to tell her husband her change of
mind with respect her intentions.
D was not representing that she would never change her mind.
The court also took into consideration the reasonability of her changing
her mind. Given that D was relatively young it could not be expected D
would never marry.
Edgington v Fitzmaurice
Facts
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This was untrue since the intention from the first had been to expend
the loan upon discharge of liabilities.
Held
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The company had not made a promise which they might or might not
be able to fulfil; they had simply told a lie.
d. Law
Kleinwort Benson Ltd v Lincoln CC
Facts
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Held
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"I have concluded that the 'misrepresentation of law' rule has not
survived the decision in the Kleinwort Benson case. Its historical
origin is as an offshoot of the 'mistake of law' rule, created by analogy
with it, and the two are logically interdependent ... The distinction
between fact and law in the context of relief from misrepresentation
has no more underlying principle to it than it does in the context of
relief from mistake ... The rules of the common law should, so far as
possible, be congruent with one another and based on coherent
principle. The survival of the 'misrepresentation of law' rule following
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the demise of the 'mistake of law' rule would be no more than a
quixotic anachronism."
It is not necessary for liability that the misrepresentation should be made directly, it
can be made to one, to be passed on to another;
The representation must, however, in one way or another, be made to the plaintiff to
induce him to act upon it.
Silence
Hands v Simpson Fawcett & Co Ltd
Facts
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Held
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There are 4 exceptions to the rule that silence will not amount to a misrepresentation. They
relate to situations where:
a. Silence distorts a positive representation
Dimmock v Hallet
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The auctioneer stated that there were tenants on the property. He remained
silent as to the fact that they had given notice to quit.
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The C in that case was induced by the idea of having bought land with tenants
already in occupation.
If a statement has been made which true at the time, but which during the
course of negotiations becomes untrue, then the person who knows that it has
become untrue is under an obligation to disclose to the other the change in
circumstances.
The gun after being fired for six rounds, flew into pieces.
Held
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The Plaintiff having one of several warehouses, next but one which
took fire, on the same evening, after that fire was apparently
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extinguished, gave instructions, by an extraordinary conveyance, for
insuring that warehouse, then having others uninsured, but without
apprising the insurers of the neighbouring fire.
Held
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3. The untrue statement of fact induced one contracting party to enter into contractual
relations
To amount to an actionable misrepresentation, an untrue statement of fact must induce an
individual or a misrepresentee to enter into contractual relations.
The false statement of fact must therefore be said to have induced the representee to enter
into the contract.
The D stated in the details that the rental value of the properties was
open to negotiation. This was not the case, new rents had been agreed
on two of the properties previously.
Held
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As long as the claimant was in fact induced, as was the case here, that
was enough to entitle him to rescission.
This was untrue since the intention from the first had been to expend
the loan upon discharge of liabilities.
Held
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Bowen LJ: What was the state of the Cs mind, and if his mind was
disturbed by the misstatement of the D, and such disturbance was in
part the cause of what he did, the mere fact of his also making a
mistake himself could make no difference
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Re Northumberland & Durham District Bank Co. ex parte Biggs
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ii.
Held
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iii.
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Held
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Held
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By getting his own experts to check out the reports he had not
relied on the accounts but his own judgment.
Redgrave v Hurd
Facts
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The D did not examine the books and papers produced, but
only looked cursorily at them. The D later agreed and paid an
initial investment.
Held
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1. He had knowledge of the facts contrary to the
representation, or,
2. He stated in terms or showed clearly by his conduct that
he did not rely on the representation.
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PART C
Types of Misrepresentation
1. Common Law Negligent Misrepresentation
See Tort Law 1 Worksheet on Pure Economic Loss
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Where a person has entered into a contract after a misrepresentation has been
made to him by another party thereto and as a result thereof he has suffered
loss, then, if the person making the misrepresentation would be liable to
damages in respect thereof had the misrepresentation been made fraudulently,
that person shall be so liable notwithstanding that the misrepresentation was
not made fraudulently, unless he proves that he had reasonable ground to
believe and did believe up to the time the contract was made that the facts
represented were true
3. Fraudulent Misrepresentation
4. Innocent Misrepresentation
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