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Contract: Misrepresentation (Elements ((1) Unambiguous false statement…
Contract: Misrepresentation
Remedies
Rescission
rescind contract
ab initio
, restoration to pre-contractual position
available for all types of misrepresentation at common law
Communication
generally necessary but not always necessary where party had done all he could
(
Car and Universal Finance v Caldwell
)
Misrepresentation Act s 1(a)
rescission possible even where misrepresentation has become a
term
rescission/damages possible
Bars to rescission
Affirmation
lorry advertised as "in exceptional condition"
buyer noticed defects and was advised by expert that lorry was not roadworthy, but still bought
(
Long v Lloyd
)
Lapse of time
found out about untruth 5 years after contract; had ample opportunity to examine painting
(
Leaf v International Galleries
)
Intervention of third party rights
(cf
Car and Universal Finance Co Ltd v Caldwell
where third party contract did not bar rescission)
Restitutio in integrum
(impossible to restore parties to original positions)
in equity, precise
restitutio in integrum
not necessary, only
substantial restitution
required, by taking account of profits and making allowances
(
Alati v Kruger
)
Inequitable to allow rescission
see Misrep Act s 2(2)
Damages
right to and quantum depends on whether fraudulent, negligent or innocent
Fraudulent misrepresentation
measure of damages (tort of deceit)
all
direct (including consequential) loss flowing from the fraudulently induced transaction, even if not reasonably foreseeable
(
Wishing Star v JTC
[2008]) (ppt)
Negligent misrepresentation
measure of damages (tort of deceit)
negligence measure for misstatements in tort
(
Hedley Byrne v Heller
) (ppt)
Innocent misrepresentation
no right to damages given that no tort (wrong) is committed
may still attract liability under Misrep Act
Indemnity on rescission
representee entitled to recover costs incurred in discharging legal obligations necessitated by contract
but not for other expenses not incurred because of contractual requirements
(
Whittington v Seale-Hayne
;
RBC Properties v Defu Furniture
)
Representee has duty to mitigate his losses
(case was about fraudulent misrep, but should apply to all types)
(
Smith New Court Securities v Scrimgeour Vickers
)
Misrepresentation Act (Cap 390)
s 2(1)
can escape liability if representor honestly believed what he said -> but what about innocent misrepresentation?
purely innocent misrepresentation (
Mindy Chen
)
Differs from tort of negligence
:
burden of proof reversed under s2(1)
no necessity for
Hedley Byrne
relationship
fraud measure of damages (
Royscot Trust v Rogerson
)
Criticisms of fiction of fraud
(
Smith New Court Securities v Scrimgeour Vickers
(at 267 and 283))
no reason in logic of principle why damages should be awarded under negligent misrepresentation
(
RBC Properties v Defu Furniture
)
Honesty and reasonableness
(
RBC Properties v Defu Furniture
)
HELD: yes reasonable grounds, may rescind but no damages under s2(1)
s 3
Exclusion clauses
no exclusion/limitation of liability/remedies for misrepresentation
unless reasonable under section 11(1) of UCTA
limitation of auctioneer's authority to make/give representation/warranty
HELD: not exclusion clause
(
Overbrooke Estates v Glencombe Properties
)
disclaimer of responsibility for statements made by agent even when agent had full authority of D to make representations
HELD: exclusion clause, had to pass "reasonableness" test
(
Cremdean Properties v Nash
)
clear words required to exclude liability for misrepresentation.
can be done by stating that there have been no representations made; or that there has been no reliance on any representations; or by an express exclusion of liability for misrepresentation.
(
AXA Sun Life Services Plc v Campbell Martin
) (ppt)
Entire agreement clauses
entire agreement clause was interpreted to be limited??
did not preclude claim for misrep
even if it did, it would not be reasonable under UCTA
(
Thomas Witter v TBP Industries
)
cf
effect was to limit liability
term excluding indirect loss
reasonableness -> circumstances: had professional help, experienced businessmen, equal bargaining power
HELD: outside scope of s 3
Acknowledgment of non-reliance may give rise to evidential estoppel
Prevents actionable misrepresentation from arising as it cannot be asserted that there was misrepresentation based on reliance
(
Watford Electronics v Sanderson
) (ppt)
s 2(2)
damages awarded in lieu of rescission if equitable to do so
nature of the misrepresentation
the loss that would be caused to the representee if the contract were upheld
the loss that rescission would cause to the representor
HELD: no misrep but damages in lieu of rescission due to (1) misrep was minor; (2) loss to representee < loss to representor
(
William Sindall v Cambridgeshire CC
)
HELD: nominal damages in lieu of rescission, which was disproportionate on facts
(
Tiong Swee Eng v Teo Khee Siang
)
cf
HELD: rescission because misrepresentation went to heart of contract, little merit in upholding lease
(
RBC Properties v Defu Furniture
)
Measure of damages
cost of cure
difference between value which property would have had, if the representation had been true, and the actual value received
(
William Sindall v CCC
)
General
Statements
Term
: statement which gives rise to an enforceable undertaking, part of the contract
importance
time
intention, etc
Representation
: a statement which asserts the truth of something without guaranteeing it to be so, may not necessarily lead to a contract
if untrue, cause of action for misrpresentation
What claim should be brought?
Misrepresentation v induced mistake
misrepresentation may also amount to induced mistake
can choose which head to sue under
Term v misrepresentation
a statement may be a term as well as a representation -> what remedies are sought? what is the threshold which must be satisfied?
e.g. specific performance/ termination must be a term
e.g. rescission of the contract, misrepresentation sufficient (lower threshold)
Puff
: vague and exaggerated statement which no reasonable person would rely on/ sale pitches
does not give rise to any legal consequences
Duties or lack thereof
No duty of disclosure
generally in ordinary commercial contracts
Duty of disclosure in certain types of contracts e.g. insurance contracts that are
uberrimae fidei
(duty to act in good faith
Duty not to make any false statements
(action in misrepresentation) arises the moment the party makes a statement
Statutory duties
CPFTA
"unfair practices" in consumer transactions
s 4 (meaning of "unfair practice")
(a) act/omission which might reasonably deceive or mislead
(b) false claims
(c) taking advantage
(d) Second Schedule (examples of "unfair practices")
First Schedule -> limited scope: dose not apply to land contracts, employment contracts (common law applies)
Types of misrepresentation
affects remedies
reflects state of mind of representor
Negligent misrepresentation
breach in duty of care
tort of negligence
(
Hedley Bryne v Heller
)
Innocent misrepresentation
made without fault (neither fraudulently nor negligently)
Fraudulent misrepresentation
statement made in the absence of honest belief that statement was true; reckless as to whether it was true or false
action in tort of deceit
HELD: honest, no misrepresentation on the facts
(
Derry v Peek
)
Elements
(1) Unambiguous false statement
Half-truth/partial non-disclosure
not all relevant facts were made known
FACTS:
statement that farms were fully tenanted
omitted to inform purchaser that tenants had given notice to quit
purchaser may lose out on rental after conclusion of contract
HELD: misrepresentation
(
Dimmock v Hallett
)
Continuing misrepresentation
duty to correct representation falsified by change in circumstances
Dr O’Flanagan correctly represented to buyers that his medical practice was valued at 2,000 pounds
However, value of practice practically worthless by time sale concluded 5 months later because of his ill health
HELD: misrepresentation
(
With v O'Flannagan
)
Misrepresentation by conduct
SGL promotional work in return for AWS sponsoring concert tour
one of the members GH was leaving, but all participated in AWS photoshoot before contact was signed
HELD: misrepresentation by conduct
(
Spice Girls Ltd v Aprilia World Service
)
Mere silence insufficient
law concerned with active misrepresentation, not passive misrepresentation; up to buyer to make inquiries
-
insufficient; no general duty which requires that [ordinary] commercial transactions … be carried on in a completely open way or requiring full disclosure at all times…”
however,
no wilful suppression of material and important facts which will render statements untrue
(
Trans-World (Aluminium) v Cornelder China
)
(4) Material induement
Material inducement
need not be sole inducement
(
Panatron Pte Ltd v Lee Chow Lee
[2001]; 8Jurong Town Corp v Wishing Star Ltd [2005]*)
(view 1) materiality is evidence of reliance BUT SG position seems to suggest that mere
materiality not sufficient to invoke presumption of reliance
(see obiter
Lim Koon Park v Yap Jin Meng
below)
(view 2) that materiality and inducement are separate requirements
No presumption of reliance due to materiality; they are separate
statement on plot ratio (which determines intensity of land use) -> no misrepresentation on the facts
even if there had been there had been a material false representation, there was no reliance -> presumption of reliance due to materiality does not arise
HELD: no misrepresentation
(
Lim Koon Park v Yap Jin Meng
, SGCA)
-
no presumption of inducement where there is disnonest misrepersentation
need to prove inducement and reliance
FACTS:
agreement on settlement of matrimonial assets (divorce)
wife sought to set aside settlement based on misrep by deceased former husband
no misrepresentaiton on financial position of the deceased
no reliance, wife had already made up her mind
HELD: no misrepresentation
(
Wee Chiaw Sek Anna v Ng Li-Ann Genevieve
, SGCA)
Elements of inducement
aware of statement
does not know statement is untrue
relied on statement
does not have reasonable grounds for doubting accuracy of statement
No reasonable grounds for doubting accuracy of statement
fact that he could have verified accuracy of statement not fatal
buyer declined opportunity to examine further documents by solicitor-plaintiff
(
Redgrave v Hurd
)
-
Trietel: CN to reduce damages
Fraud and irrelevance of expertise
WSL cannot escape fraudulent misrepresentation by arguing that JTC relied on evaluation by its consultant (JCPL), unless JTC learnt of untruth before entering contract or does not rely on misrepresentation.
expertise (JTC) does not bar inducement
policy: prevent encouragement of fraud
(
Jurong Town Corp v Wishing Star Ltd
)
Self-induced misrepresentation
(silence)
E thought limited edition bronze sculpture was exclusive piece
OG was silent
(
Eng Hui Cheh David v Opera Gallery
)
(3) Addressed to the party misled
prospectus issued to original allottees and not purchaser
purchaser relied on false statement
NB: but
indirect representation
effective if representor
intended to be passed
to representee
HELD: no misrepresentation
(
Peek v Gurney
)
(2) Statement of fact
(or opinion?)
Statements of fact: position, knowledge and skill of representor
"most desirable tenant" but knew rent remained unpaid and was late in instalments, legal proceedings had to be brought against tenant
if facts are not equally known to both sides, statement of
opinion by the one who knows the facts best might imply a statement of facts which justify that opinion
(Bowen LJ)
(
Smith v Land & House Property
)
actual turnover a lower number of gallons than represented, statement was a profits forecast made with
special knowledge and skill
of E (
Esso Petroleum Ltd v Mardon
)
statement of opinion actionable where (i) it is dishonest or (ii) there is no reasonable basis for it
HELD: misrepresentation
Statements of opinion: no special skill or expertise
both in the same position to form opinion
statement of honest opinion did not imply the vendor knew facts justifying it
HELD: no misrepresentation
(
Bisset v Wilkinson
)
Statement of future conduct/intention
cf
Honesty
statement of "exclusive membership" club is a statement of a future intention which the club operator honestly believed in at the time statement was made
HELD: no misrepresentation
(
Tan Chin Seng v Raffles Town Club Pte Ltd
)
statements of future intention (bank's private wealth management services) with honest belief in truth; meant to interest him into entering into relationship with DB (no hard sell, he was given choice to enter)
statement that services provided by DB were among the best was not false
HELD: no misrepresentation
(
Deutsche Bank v Chang Tse Wen
)
Dishonesty
generally not statement of fact, but actionable if misrepresenting present intention
statement that money would be used to grow company, but used instead to pay debts (company knew)
HELD: misrepresentation
(
Edgington v Fitzmaurice
)
-
“A statement of intention is not a representation of existing fact, unless the person making it does not honestly hold the intention he is expressing, in which case there is a misrepresentation of fact in relation to the state of that person’s mind”
(
Wales v Wadham
)
False statement of law
traditionally not actionable in misrepresentation
-
a case involving restitution: HL abolished law-fact distinction in allowing restitutionary claims for mistaken payment in law
(
Kleinwort Benson v Lincoln CC
)
-
a case involving misrepresentation: law-fact distinction did not survive
Kleinwort
(
Pankhania v LB Hackney
UK)
has not been addressed in SG yet, but should be adopted
Effects
voidable
, not void: valid until set aside by representee
affirm
(contract cannot be set aside anymore) or
rescind
(contract terminated
ab initio
, unlike prospective termination due to breach of term)