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Misrepresentation and Mistake - Coggle Diagram
Misrepresentation and Mistake
Misrepresentation
Definition
False
CANNOT be true, false at the time which contract was made
as a result of this false statement the other party enters into contract
Addressed to the other party
direct to the misrepresentee
Induces the other party to enter into the contract
misrepresentee rely on this to enter contract
not actionable if party wouldve enter anyway
Statement of fact or law
apply the reasonable person test
A "Statement"
NOT Misrepresentation:
"mere puff"
exaggerated
, not intend to be taken seriously
Dimmock v Hallet
: a "mere flourishing description"
misrepresentation may become
term of the contract
Oscar Chess v Williams
statement by amateur car owner --> expert
court: they just rely on documents,
NOT term of contract
relative position
of parties important
Dick Bentley Productions v harold Smith
statement made by expert car dealer --> amateur
court:
term of the contract
contractual promise
Couchman v Hill
when one provide statement of fact that
is entirely within their knowledge
but NOT within knowledge of the other party
the
identity
of the subject matter of contract is important
collateral contract
De Lassalle v Guildford
assurance that drain is in good order
written contract for lease of house
a
promise
which is not term of contract but collateral contract
Actionable misrepresentation
False statement of law counts
Pankhania v London Borough of Hackney
Statement of opinion or belief
Generally DO NOT amount to actionable misrepres
Bisset v Wilkinson
Statement of opinion that include statement of facts
Smith v Land & House Property Corp
abt the desireability of a certain tenant
statement of opinion that includes statement of fact ==> misrepresentation of fact
Esso petroleum v Mardon
Statement as to future conduct or intention
generally not actionable
something that has not happen but u say will happen
statement of intention can be statements of fact
Edgington v Fitzmaurice
: company seeking investment, but rly asking money to pay debts
its a statement of intention,
but nevertheless a statement of fact
D stating a fact which is not true = misrepres
Form
of misrepresentation
words - verbal/written
Gestures
Walters v Morgan
"a nod or wink, or a shake of head, or smile"
CAN
Conduct
Spice girls v Aprilia world service BV
conduct of not informing company --> actionable misrep.
Maybe?
Silence
generally NO
NO GENERAL DUTY OF DISCLOSURE
but contract of
good faith
With v O'Flanagan
representation later falsified
vendor should have
disclosed changing circumstances
keeping silent = actionable misrepres
Types of misrepresentation
Fraudulent
: representor does NOT believe it to be tru
Innocent
: representor believes it to be tru
Negligent
: representor careless, no reasonable belief in its truth
Reliance on misrepresentation
it
must induce the misrepresentee to enter
BUT it need NOT be the sole cause
Edgington v Fitzmaurice
as long as its one of the reason
Raiffeisen Zentralbank Osterreich v Royal bank of scotland
representation must play
causative
part
"but for" causation
belief in the truth of representation not a separate requirement
Hayward v Zurich Insurance
doesnt matter whether misrepresentee believe it to be tru
H tricked Z, Z very sus but still give money
H argued no misrep cuz Z doesnt believe H
Presumption: misrep induced the other party to enter contract
particularly in fraud:
BV Nederlandse Industrie van Eiproduckten v Rembrandt Enterprises
"presumption of inducement"
Remedies for misrepresentation
Rescission
potentially available for fraudulent/negligent/innocent misrep
setting aside the contract : putting parties back to position as if the contract has never been performed
self help remedy: notice by misrepresentee to misrepresentor
just say "I wish to rescind"
Innocent party's own act
or election is enuf
Street v Coombes
sometimes
possible without notice to the other party
, as long as reasonable steps taken to disaffirm contract
Car and universal finance v Caldwell
dont have to give notice of rescission directly to misrepresentor
can exercise
self help remedy (informing police)
usually enuf for innocent party to make notice on their own
Difference b
/ rescission because of misrepres vs. breach of contract
breach discharge party from that point onwards
Misrep: rescission setting aside contract, prospectively+retrospectively theres no contract
Bar on rescission
affirmation of contract by misrepresentee
Street v Coombes
: if somebody make desperate attempt to keep going, will NOT be affirmation
if misrepresentee knows & just accept,
cant rescind
third party rights
Lapse of time
Leaf v International Galleries
rescission barred by length of time
Geoffrey Alan Salt v Stratstone Specialist
lapse of time not bar on rescission
Impossibility of restoring status
Erlanger v new Sombrero Phosphate
cannot absolutely restore ≠ bar to rescission
what seller pay is reduced by work already done
Damage in lieu of rescission
rather than rescind, award damages
Damages
for tort of deceit or fraud
for fraudulent misrep
Derry v Peek
"false representation has been made 1) knowingly, 2) without belief in its truth and 3) recklessly
more generous than tort of negligence
no defence of contributory negligence
impossible to exclude liability fro fraud
representee can cover all losses caused directly by the deceit
even though not reasonably foreseeable
NOT for innocent misrep
Misrepresentation Act 1967 s 2
looking at scenario where misrep is NOT fraudulent
reversed burden of proof
misrepresentor need to prove they have reasonable grounds to believe
and this belief is in existence up to the time that contract was made
remedies
damage instead of rescission
damage in addition to rescission
heavy burden f
or misrepresentor to prove "reasonable grounds to believe
Howard Marine and Dredging v A Ogden & Sons
more generous foreseeability rules for deceit apply
Royscot Trust v Rogerson
unforeseeable damages also permitted
as in the case of damages for tort of deceit
defence of contributory negligence available
Gran Gelato v Richcliff
Damage in lieu of rescission
NOT fraudulent misrepres, but innocent/negligent
s 2 (2) of Misrepresentation Act
have the right to rescind BUT court award damages instead
William Sindall v Cambridgeshire CC
equitable to grant damage instead of rescission
Geoffrey Alan Salt v Stratstone
cannot be awarded where rescission not available
if rescission barred than NO damage in lieu
narrower
in scope than
Hedley Byrne
DOC, only deals w representation in which the representee then contracts
for negligent misrep
Hedley Byrne v Heller
a duty of care might be owed
some form of "special relationship" or "voluntary assumption of responsibility"
no need to show theres contract
3 type: Fraudulent/innocent/negligent
Negligent
:
Hedley Byrne
, under Misrepres Act
Innocent
: under Misrepres
Both
Exclusion/Limitation of liability
Misrepresentation Act 1967 S3(1):
a term which exclude/restrict liability
whether there would be an actionable misrep, were it not for the clause
First Tower Trustees v CDS
: a
"no reliance" clause may be an exclusion clasue
should satisfy reasonableness test
"reasonableness" of a condition
Clever & Ors v Schyde Investments
deliberate misrepresentation: common law rule, CANNOT exclude liability for fraud
focus on careless or careful misrep
Mistake
Unilateral mistake
: identity of the person
face to face
Rebuttable presumption: mistaken party intends to contract w the other person who is physically present and identifiable by sight and sound, irrespective of the assumed identity
basically intend to contract who is in front of you
Lewis v Averay
: Fraudulent misrepresentation --> Voidable
mistake as to identity avoids a contract, but mistake as to attribute DOES NOT
assumption was not discharged
(Lewis intend to deal w the man present, the rogue)
Ingram v Little
: Mistake as to identity of the person --> void
C intended to contract w X, not rogue
Pearce LJ: whether the seller just looking for ppl with that attribute vs. the particular identity
Philips v Brooks
: not mistake of identity, was fraudulent misrep, voidable
trading w the man in shop
Other contracts
C intend to contract w an identifiable third party
Shogun finance v hudson
intend to contract w person in hire purchase agreement
when
contract = writing, contract is w who is named
(X, not the rogue)
mistake as to identity --> VOID
Unilateral mistake: terms of the contract
Smith v Hughes
: unilateral mistake itself not sufficient to invalidate
Exception: mistake party confused abt the terms as the other party is unclear
Scriven Brothers v Hindley
if one party is at fault (failing to notice offer contain mistake/if they induce that mistake) then party at fault cannot held the other party to the terms
Starting point:
objective
approach, the fact that one party laboring under subjective mistake irrelevant
when one party makes mistake abt terms of contract,
then if the other party knows or ought to have known of this mistake
, NO contract
Hartog v Colin &Shields**
:
cant snap up an offer which you know was not intended by the offeror**
Unilateral mistake:
non est factum
fundamental mistake
through no fault/negligence of mistaken party
permanently/negligently unable to have real understanding of doc they had sign
very narrow scope
e.g. fraud of third party, offeror misleading offeree
Common mistake
parties share fundamental mistake abt subject matter
mistake as to existence or identity of subject matter
Sale of Goods Act 1979 s 6
: where there is contract for sale of specific goods, goods perished
subject matter no longer in existence
Exception: McRae v Commonwealth Disposals Commission
if you promise something is there and its not -->
breach of contract, can't argue common mistake for existence of subject matter
Mistake as to quality of subject matter
*Bell
v Lever Bros*
common mistake has to be the
"essential quality"
of contract to make it void
high threshold
Lord Atkin: a mistake will NOT stop contract forming UNLESS it is a
common mistake
AND is as to the
existence
of some
important
quality
the test in
The Great Peace
a common assumption as to the existence of the state of affairs
No warranty by either party that the state of affairs exist
non-existence of state of affairs must not be attributable to the fault of either party
non-existence of state of affaris must render contract performance
impossible
"impossibility" test
state of affairs may be the existence, or viral attribute, of the consideration to be provided or circumstances which must subsist if performance of the contractual adventure is to be possible
contractual adventur
e in this case = great peace rescuing other ships
CA: NO common mistake, does not pass the
requirement of impossibility
(contract can still be performed)
Effect of common mistake
orthodox "doctrine of
mistake
at law" approach
Construction or "
implied terms
" approach
Rectification of mistake
Written contract: court can rectify/rewrite
Mistake: common/unilateral
Rectify
common mistake
make sense - reflect parties' share intention
unilateral: court look for
unconscionability
Courts allow to rectify/rewrite such mistake
rectification used narrowly due to
effect on 3P
Rectification: common mistake
four requirements
mistake as to the parties' prior oral agreement or common intention is in
writing
both parties
mistakenly
believe that contract accurately records their prior oral agreement/common intention
a concluded oral agreement/common intention as to the ultimate terms of written contract +
outward expression of accord
convincing proof os mistake in written contract
FSHC Group v GLAS Trust
previous binding oral contract put into writing -->
objective intention
no binding contract but
shared understanding + outward expression of accord
-->
subjective intention
not intention they kept, but they
express
to each other
Rectification: Unilateral mistake
three requirements
mistake by A as to terms of contract
B knows of this mistake
or suspect it has been made
unconscionable action by B
preventing A from discovering error
making misrepresentation as to terms
Thomas Bates & Son v Wyndham
party B suppressed the fact that he recognize the mistake
unconscionability
Commission for the New Towns v Cooper
B dont need to have actual knowledge of mistake
if B
wilfully/recklessly fail
, contrary to the notion of reasonableness and honesty,
to inquire whether there has been a mistake --> can be unsconscionable
remedy = declare contract to be void
test difficult to satisfy (e.g. test of impossibility, essential quality (
Bell
))
narrow approach via objective intention of the parties (dont want intervene too much)
WORK ENDS HERE