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Contract Law - Misrepresentation (5) P1 - Coggle Diagram
Contract Law - Misrepresentation (5)
P1
I.What counts as an actionable misrepresentation?
Even if the statement not incorpo as a term = influential possible
Step 1: False statement
Step 2: Statement of fact
Step 3: inducement / reliance by the party to enter into the contract
Step 4: Misrep material to the decision to contract
A.Silence: misrepresentation or non-disclosure?
2 are diff (non liability for non-disclo) , if answer too large, think no right to be told = no misrep. Why some are asking v spe Q to make the other party liable
1.Contracts uberrimae fidei
/utmost GF = very limited group of ct that can be avoided by one party if the other party has not disclosed material matters known to him
Ex insurance, insured obliged to disclose mat circumstances. If not = insurer entitled to avoid the contract
Materiality = all influence the decision of a prudent insurer even if not decision (Pan Atlantic Insurance v Pine Top Insurance (1994 :warning:)
Test v favourable to insurers
Sometimes, disclosure and misrep shade into one other
~ccial or not
Silent: in some circum = implied rpz (not liability for non disclosure but combined with other statements/circum = misrep)
2.Representation later falsified
True when made but later falsified = maker of original statement = disclose new position (liable if not) (O'Flanagan 1936 :red_flag:)
Suggest. continuing rpz principle applies = representor accurately states his intention then changes his mind without informing other pt
3.Telling only half the truth
Notts Patent Brick and Tile Co v Butler (1886)
Can be misleading even if true (omitted relevant stuff)
4.Conduct as misrepresentation
Gesture can = statement (thumbs up, nod)
Spice Girls Ltd v Aprilia World Service BV (2002) :warning: (one member leaving, all knew, but still signed, did promo)
B.Misrepresentation must be of fact
to give liability
1.Mere puffs?
vague boasts
judged objectively, taken seriously? (even if extravagant, as Carbolic Smoke)
2.Statement of fact or statement of opinion?
Opinion = :red_cross: misrep (eg Bisset v Wilkinson 1927 :red_flag:
Distinction no clear cut, some are saying both can lead to misrep as Bridge LJ in Cremdean Properties 1977)
Spe knowledge/expertise than the other = courts more likely to traeat it as an opinion actionable as misrep rathan tha amateurs
Esso Petroleum Co v Mardin (1976) (opinion with implication that facts support it)
Depend if reasonable grounds for holding that opinion (painter) (eg Brown v Raphael 1958 :warning:
3.Statements of fact distinguished from statements as to the future?
future intention = no misrep/fact (# promise = broken or kept, statement of fact = true or false)
Statement for future can carry a fact (Spice Girls)
4.Representations of law
not actionable
Borderline cases ! Eg, statement about person legal rights
C.The impact on the misrepresentee
Been said to separate material misrep (objective Q, rpz would have had to a reasonable person) + induced or caused the actual representee to enter the contract. But not should be regarded as separate.
Often, the 2 are not too different. A real Q only if the rpz would seem trivial or immat. But can have a reason. Unlikely to dismiss only bc of the test of average person
Reconcile 2 apparent requirements: rpz mat in that it would have influenced a reasonable person, this raises an inference that it caused the representee to enter the contract, which the other party may then rebut
Difficult to rebut for a fraudster (Hayward v Zurich Insurance Co (2016))
D.Causation in fact—reliance
Induced not ideal, = entry desired by the representor but not suitable to all cases after fraudulent misrep/deceit
"reliance" better ( :check: Downs v Chappell 1996)
Normally courts will ask what the representee would have done had no representation been made, rather than what he would have done had he been told the truth, but occasionally the courts explore both issues
Basic rule:
representee must have relied on the representation. If rpz = no influence = no remedy
If no reliance before the ct made (rpz came to the attention after), no misrep (Hunt v Optima 2014 :warning:)
Cases where nb of statements, some true, false = sum up = ct. And numerous other factors
Misrep need not to be claimant's sole or main inducement to ente into the contract, provided it formed a reason why he did so
Need substantial part, though not decisive, cause of his losses, releis on it, no matter how strong/many are the other matters in inducing him (Stephenson LJ in JEB Fasterners :warning: 1983)
Causative part, involving "but for" -> Raiffeisen Zentralbank 2010 :warning:)
If misrep = no different to the representee, acted same way, same terms = no rescission/damages (JEB Fasternes eg, same decision if the truth known, no casual connection between defendants negligence and loss)
Causal link generally not enough, making representee persevere in a already made decision (Barton v County Nat West 1999 :warning:)
But difficult to explain
Other reasons besides rpz # from saying inducing by the rpz
Rarely seen = entered into the contract without the rpz but
on different terms
= But sufficient reliance, for rescissio and damages
Belief in the truth of the rpz is not a separate requirement
Hayward v Zurich Insurance 2016 :red_flag:
:check: Zurich holding that if a claimant is induced to enter into the particular contract by the representation, there is no additional requirement that the claimant must have believed its truth (no "eyes open, taking the risk if not being true...)
Pb: if non taken opportunity to discover the truth and said to have relied on the rpz. Trad rule = even if neglects it, can rescind)
Redgrave v Hurd (1881), representor = better placed to provide accurate information, risk if no check accuracy of info should fall on the representor (could have discovered true position by some readings)
But where the representee was better placed to acquire accurate information or confirmation, but failed to take reasonable steps to do so, the court might conclude that the representee did not rely on the initial rpz
Possible to recover damages for negligent misrep in tort and under the Misrep act
In tort, can take into account contributory negligence and under the misrep act (Gran Gelato v Richcliff 1992 :warning:)
II.Remedies for misrepresentation: rescission
ppal remedy
because rescission is potentially available whatever the misrepresentor’s state of mind was (fraudulent, negligent, innocent) whereas damages depends on level of fault
A.What is rescission?
"undo" the contract = voidable, right to affirm or rescind transaction
Involves so far as possible restoring the parties to the pre-contract position, status quo ante. Setting it back to the beginning (no have to perform obligations, pties returned...)
/# for termination for breach which is prospective only
How rescission occurs.
Theoretically possible to rescind a contract merely by giving notice to the other party (self-help). No formal requiements of court order but practice makes it different (disputes grounds of recission...)
Where court order of rescission is obtained, the order is said to be ‘back-dated’ to the date of the party’s own act of rescission
Both aspects are pbm, ex pty? Status of it between the representee electing to rescind and a later court order either confirming the rescission (O'Sullivan 2000 :closed_book:)
B.When rescission is unavailable
Misrepresentee loses the right to rescind the contract (barred)
Ex affirm the ct after discovering the truth (expressely, acting in a way inconsistent with putting aside) but not inferred lightly (ex need to keep the business going)
Not clear if wait too long before rescinding (evidence of affirmation or distinct bar)
Relevant Q: lapse of time alone operates as a bar, even if the misrepresentee seeks rescission immediately on discovering the truth
Several cases suggest not ( :check: if takes a long time before falsity of rpz to come to light, as long as he acts promptly as soon as it does)
One case suggests the opposit (Leaf v International Galleries (1950) :warning: -> truth 5y later real painter, attempted to rescind immediately -> CA -> too late
Leaf = wholly innocent misrep, may have some indulgence to the representer.
Salt v Stratstone Specialist Ltd (2015) said Leaf = out of date = change of SGA + Misrep Act
Intervening third party rights bar rescission -> eg interest in a pty, too late. 3rd party must be in good faith, for value, without notice of the initial contract defect (// decision shares)
But Nahan :closed_book: 1997 = should not bar a personal remedy (financial equivalent of rescission)
Impossibility of restoring the status quo ante bars rescission (eg Thomas Witter Ltd v TBP Industries 1996 about a business)
BUT requirement of restoring status quo not rigit inflexible, can be substantially restored can be enough
Ex take account fo profits, make allowance for deterioration, financial adjustement :check: Lord Blackburn in Erlanger v New Sombrero Phosphate Co (1878) :warning:
Changes to a car after years will not bar, just change of paper (Salt v Stratstone 2015)
House of Lords has suggested that the courts might be prepared to be more flexible than has previously been envisaged in finding ways round the fact that restitutio in integrum is literally impossible (Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd (1997) -> identical shares can be purchased on the market = but sensible bc no need to have the exact sames shares like the exact same money)
C.Rescission where the misrepresentation was not made by party to the contract
Normally, rescission is only available where the misrep was made by the other party to the contract.
In one limited context, the law allows a contract to be rescinded because of a misrep as to terms made by a third party where the other party to the contract has mere
constructive notice of that misrepresentation
Barclays Bank plc v O’Brien (1994) :red_flag:
Principle usually pleaded in undue influence, but applies equally to misrep in same context)
Critics about why extending to misrep but regime well established
Refusal to allow partial rescission: all or nothing process (Molestina v Ponton 2002 :warning:)
Opposite conclusion by Australian courts in 1995
not sure about this part :!: