In common law jurisdictions, a misrepresentation is a false or misleadingR v Kylsant statement of fact made during negotiations by one party to another, the statement then inducing that other party to enter into a contract.In Curtis v Chemical Cleaning and Dyeing Co Ms Curtis took a wedding dress with beads and sequins to the cleaners. They gave her a contract to sign and she asked the assistant what it was. The assistant said it merely covered risk to the beads, but in fact the contract exempted all liability. The dress was stained but the exclusion was ineffective because of the assistant's misrepresentation, and the claim was allowed.Curtis v Chemical Cleaning and Dyeing Co 1 KB 805 The misled party may normally rescind the contract, and sometimes may be awarded damages as well (or instead of rescission).
The law of misrepresentation is an amalgam of contract and tort; and its sources are common law, equity and statute. In England and Wales, the common law was amended by the Misrepresentation Act 1967. The general principle of misrepresentation has been adopted by the United States and other former British colonies, e.g. India.
Representation and contract terms A "representation" is a pre-contractual statement made during negotiations.For the purposes of "offer and acceptance", a representation may serve a further function such as an "offer", "counter-offer", "invitation to treat", "request for information" or "statement of intention" If a representation has been incorporated into the contract as a term,A contractual term may be a warranty, condition or innominate term. then the normal remedies for breach of contract apply. Factors that determine whether or not a representation has become a term include: The relative expertise of the parties.Oscar Chess v Williams (1957) Dick Bentley v Harold Smith Motors (1965) The reliance that one party has shown on the statement.Bannerman v White (1861). The reassurances given by the speaker.Schawel v Reade (1913) The customary norms of the trade in question.Ecay v Godfrey (1947) The representation forms the basis of a collateral contract.Andrews v Hopkinson (1957)Shanklin Pier v Detel Products (1951)Evans v Andrea Merzario (1976)Heilbut, Symons & Co. v Buckleton A.C. 30 HLHoyt's Pty Ltd v Spencer .
Otherwise, an action may lie in misrepresentation, and perhaps in the torts of negligence and deceit also. Although a suit for breach of contract is relatively straightforward, there are advantages in bringing a parallel suit in misrepresentation, because whereas repudiation is available only for breach of condition,A "condition" is a term whose breach denies the main benefit of the contract to the claimant. rescission is prima facie available for all misrepresentations, subject to the provisions of s.2 of the Misrepresentation Act 1967, and subject to the inherent limitations of an equitable remedy."Inherent limitations": equitable remedies are only ever discretionary; and one must "come to equity with clean hands".
Duties of the parties For a misrepresentation to occur, especially a negligent misrepresentation, the following elements need to be satisfied. A positive duty that exists to ascertain and convey the truth to the other contracting party, and subsequently a failure to meet that duty, and ultimately a harm must arise from that failure.
English contract law There is no general duty of disclosure in English contract law, and one is normally not obliged to say anything.However, EU Law has introduced a "right of reasonable expectation". - Marleasing Ordinary contracts do not require "good faith" as such, and mere compliance with the law is sufficient. However in particular relationships silence may form the basis of an actionable misrepresentation:.See, e.g., Davies v. London & Provincial Marine Insurance Co (1878) 8 Ch. D. 469, 474. Justice Fry commented on the responsibilities of a fiduciary "...they can only contract after the most ample disclosure of everything..."
Agents have a fiduciary relationship with their principal. They must make proper disclosure and must not make secret profits.Lowther v Lord Lowther (1806) 13 Ves Jr 95, the plaintiff handed over a picture to an agent for sale. The agent knew of the picture's true worth yet bought it for a considerably lower price. The plaintiff subsequently discovered the picture's true worth and sued to rescind the contract. It was held that the defendant was in a fiduciary relationship with the plaintiff and accordingly assumed an obligation to disclose all material facts. Accordingly, the contract could be rescinded. Employers and employees have a bona fide duty to each other once a contract of employment has begun; but a job applicant owes no duty of disclosure in a job interview.In Fletcher v Krell (1873) 2 LJ (QB) 55, a woman who was appointed to the post of governess failed to reveal that she had previously been married. (The employer favoured single women). It was held that she had made no misrepresentation.Spice Girls v Aprilia World Service CHD 24 FEB 2000 A contract uberrimae fidei is a contract of 'utmost good faith', and include contracts of insurance, business partnerships, and family agreements.Gordon v Gordon (1821) 3 Swan 400, two brothers had reached an agreement regarding the family estate. The elder brother was under the impression that he was born out of wedlock and thus not their father's true heir. The agreement was reached on this basis. The elder brother subsequently discovered that this was not the case and that the younger brother had knowledge of this during the negotiation of the settlement. The elder brother sued to set aside the agreement and was successful on the grounds that such a contract was one of uberrimae fidei and the required disclosure had not been executed. When applying for insurance, the proposer must disclose all material facts for the insurer properly to assess the risk.In insurance the insurer agrees to indemnify the assured against losses proximately caused by insured perils, and the insurer is thus entitled to know full details of the risk being transferred to him.Lord Blackburn addressed the issue in Brownlie v Campbell (1880) 5 App Cas 925 when he noted "...the concealment of a material circumstance known to you...avoids the policy."In the 1908 case of Joel v Law Union KB 884 the de minimis rule was applied in a life assurance policy. Despite minor omissions, the assured had made a sufficiently substantial disclosure of material facts that the insurer knew the risk, and the policy was validlex non curat de minimis - the law does not concern itself with trifles In the UK, the duty of disclosure in insurance has been substantially amended by the Insurance Act 2015.
The "untrue statement"
To amount to a misrepresentation, the statement must be untrue or seriously misleading. A statement that is "technically true" but that gives a misleading impression is deemed an "untrue statement".In Krakowski v Eurolynx Properties Ltd, Krakowski agreed to enter into a contract to buy a shop premises from Eurolynx as long as a 'strong tenant' had been organised. The contract proceeded on the grounds that such a tenant had been arranged. Unbeknown to Krakowski, Eurolynx had entered into an additional agreement with the tenant to provide funds for the first three months rent to ensure the contract went ahead. When the tenant defaulted on the rent and subsequently vacated the premises, Krakowski found out about the additional agreement and rescinded the contract with Eurolynx. It was held that Eurolynx's failure to disclose all material facts about the 'strong tenant' was enough to constitute a misrepresentation and the contract could be rescinded on these grounds. If a misstatement is made and later the representor finds that it is false, it becomes fraudulent unless the representer updates the other party.Lockhart v. Osman VR 57, an agent had advertised some cattle as being "well-suited for breeding purposes". Later on, it was discovered that the stock had been exposed to a contagious disease which affected the reproductive system. It was held that the agent had a duty to take remedial action and correct the representation. The failure by the agent to take such measures resulted in the contract being set aside. If the statement is true at the time, but becomes untrue due to a change in circumstances, the representor must update the original statement.With v O'Flanagan Ch. 575, the plaintiff entered into a contract to purchase O'Flanagan's medical practice. During negotiations it was said that the practice produced an income of £2000 per year. Before the contract was signed, the practice took a downward turn and lost a significant amount of value. After the contract had been entered into, the true nature of the practice was discovered and the plaintiff took action in misrepresentation. In his decision, Lord Wright said, "...a representation made as a matter of inducement to enter into a contract is to be treated as a continuing representation".With v O'Flanagan Ch. 575, 584. Actionable misrepresentations must be misstatements of fact or law:Kleinwort Benson Ltd v Lincoln City Council 2 AC 349, abolished a bar on mistake of law bar and Pankhania v Hackney LBC EWHC 2441 (Ch) held the same went for misrepresentation under Misrepresentation Act 1967 s 2(1) where agents of a land seller incorrectly said that people running a car park on some property were licensees rather than protected business tenants. misstatements of opinionBisset v Wilkinson AC 177 PC or intention are not deemed statements of fact;See Achut v Achuthan AC 177.. but if one party appears to have specialist knowledge of the topic, his "opinions" may be considered actionable misstatements of fact.See Esso Petroleum Co Ltd v Mardon 2 Lloyd's Rep 305.Smith v Land & House Property (1884) 28 Ch D 7 CA For example, false statements made by a seller regarding the quality or nature of the property that the seller has may constitute misrepresentation.Smith v Land & House Property (1884) 28 Ch D 7 CA
Statements of opinion Statements of opinion are usually insufficient to amount to a misrepresentation as it would be unreasonable to treat personal opinions as "facts", as in Bisset v Wilkinson.Bisset v Wilkinson AC 177.
Exceptions can arise when opinions may be treated as "facts":
- when an opinion is expressed yet this opinion is not actually held by the representor,
- when it is implied that the representor has facts on which to base the opinion,See, e.g., Smith v Land & House Property Corp (1884) 28 Ch. D. 7.
- when one party should have known facts on which such an opinion would be based.See, e.g., Esso Petroleum v Mardon QB 801.
Statements of intention Statements of intention do not constitute misrepresentations should they fail to come to fruition, since the time the statements were made they can not be deemed either true or false. However, an action can be brought if the intention never actually existed, as in Edgington v Fitzmaurice.In Edgington v Fitzmaurice (1885) 29 Ch. D. 459, company directors seeking a loan "intended to develop the business" always intended to use the cash to repay debts. The state of mind is an existing fact, therefore, a false presentation of an existing fact, so that the contract was voidable.
Statements of law