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Misrepresentation - Coggle Diagram
Misrepresentation
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Fraudulent
leading case on this is Derry v Peek where lord herschell defined fraud as a false statement:
made knowingly or without belief in its truth, or recklessly, careless whether it be true or false
fraud is a serious allegation - at common law the only action available for misrep is where fraud can be clearly and distinctly proved
for fraudulent misrep to be successful the essence of liability will be to show the dishonesty of the defendant in making the statement - reason for making the statement is irrelevant if the claimant makes a loss as a result of the statement there is a potential claim
at one time the distinction between fraudulent and non-fraudulent misrep was crucial because damages were only awarded for fraudulent misrep - with development of negligent misrep the distinction is less important although until recently it was thought that higher damages were awarded for fraudulent misrep
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Remedies:
method for assessing damages awarded is according to rules of tort (putting person in position they would be in if tort hadnt occured) rather than the rules of contract (putting them in position they would have been in had contract been properly performed)
defendant will be responsible for all the losses including any consequential loss, if a casual link can be proved between the fraudulent statement and the loss
claimant in fraudulent misrep can either
- affirm contract & sue
- disaffirm and refused further performance:
no point in bringing an action as damages would not be recoverable - claimant can discontinue performance of obligation and do nothing
claimant could seek recission of contract in equity - put him back in pre-contractual position providing this was possible
Negligent
involves a statement being made honestly but without there being reasonable grounds for belief - originally at common law it wasnt recognized as it fell outside definition given by lord herschell in Derry v Peek
over the years the concept has been developed by courts & ultimately statute
at common law it was gradually accepted that an action for negligent misstatement causing pecuniary loss did lead to cause of action
the courts gradually refined the Hedley Byrne & co v Heller & Partners ltd case so that a claim in negligent misrep requires the following elements:
- person making false statement must be in possession of some specialist knowledge
- there must be proximity between the parties so that it is reasonable for the statement to be relied upon
- party to whom the statement is made relies on it
- the party making the statement must have known or ought to have known why the claimant needed the info
- party making the statement must have assumed responsibility to give advice and info
Remedies:
Misrep Act 1987:
s2(1) demonstrates that there is no longer a need to show the special relationship as required in Hedley Byrne
burden of proof is on the representor to show that he was not careless in making the statement - burden is heavy one and will be difficult to discharge as shown in Howard Marine & Dredging co ltd v A Ogden & Sons
Damages:
under the act and at common law, damages are available.
- if claimed under Hedley Byrne, damages are calculated according to the standard measure in tort - they will only be awarded for foreseeable loss as a result of the negligent statement
- under the act damages are also awarded on the tort measure - as a result of decision in Royscot Trust Ltd v Rogerston consequential losses may also be claimed meaning that it will not be necessary for them to be foreseeable
- also possible to claim for recession in equity
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Innocent
Misrep that is neither fraudulent nor negligent - in view of reversed burden of proof in s2(1) of the 1967 act an innocent misrep will occur where the representor believes the facts to be true and he can prove that he had reasonable grounds for believing those statements
Remedies:
damages were not formerly available under common law and recission was the only remedy
under s2(2) of the act the court has the discretion to award damages as an alternative to recission - court will have to consider the nature of misrep and loss that would be caused by it if the contract were upheld as well as loss that recission would cause to other party
representations that aren't included in the contract will not have any contractual relevance if they are factually and accurately stated
although a falsely made representation will be a misrepresentation - can have contractual signficance even though it has not been incorporated in the contract
- to be actionable the statement must not only be false but have induced the innocent party to enter into the contract
- if a contract is formed as a result of misrep then the contract is voidable at request of party who is the victim of misrep