Contract Law - Misrepresentation

Unilateral mistake - Types

1) A unilateral mistake as to the expression of intention 2) A unilateral mistake as to the nature of the document signed 3) A unilateral mistake as to identity

Mistake - Categories

1) Common Mistake 2) Mutual Mistake 3) Unilateral Mistake

Misrepresentation Categories

1) Fraudulent Misrep 2) Negligent Misrep 3) Innocent Misrep 4) Negligent Misstatement

Misrepresentation - Structure

1) Identify the potential misrepresentation 2) Classify it 3) Discuss defences 4) Consider remedies

Remedies - list

1) Rescission 2) Damages 3) Indemnity

Misrepresentation - Definition

Actionable misrepresentations are unambiguous (McInerny v Lloyds) false (Avon v Fraser) statements of fact or law addressed to the party misled (Commercial Bank v Brown), which are material (Pan Atlantic v Pine) and induce him into the contract with the statement maker (Smith v Chadwick), causing him damage.

Statement of fact - future intentions

Beattie v Edbury: a statement of future intention is generally not a statement of fact Edgington v Fitzmaurice: a statement of future intention will be a statement of fact if the representor did not truly hold the intention at the time of making the statement

Statement of fact - opinions

Bissett v Wilkinson: an opinion is generally not a statement of fact Smith v Land Property: an opinion can be elevated to a statement of fact if the representor has greater knowledge and expertise and could not reasonably have held the opinion he expressed

Fraudulent Misrep - definition

Derry v Peek: fraudulent misrep is one made knowingly without any belief in its truth or recklessly as to whether it was true or false Witter v TPB: "recklessness" is deliberately shutting one's eyes or not investigating the truth of the statement C has burden of proof - difficult to discharge

Remedies - Damages (Fraudulent)

Doyle v Olby: where there is a FRAUDULENT misrep, C can claim for ALL losses flowing directly from the transaction, even if unforeseeable Smith New Court: C must still take steps to mitigate his losses

Remedies - Indemnity

For all forms of negligence, C is entitled to indemnity for expenses arising from legal obligations created by contract (Whittington v Seale)

Statement of fact - conduct

Gordon v Sellico: conduct (such as concealment of a physical defect) can be a statement of fact

Unilateral mistake - intention

Hartog v Colin: if the offeror has mistakenly made an offer other than that which he intended, and the offeree is or should have been aware of it, he cannot "snap up" the offer.

Negligent Misstatement - definition

Hedley Byrne v Heller: this applies where there is a special relationship between the representor and representee, which is breached by the representation, causing economic loss.

Inducement - other rules

Horsfall v Thomas: cannot have inducement where C was not aware of the statement Redgrave v Hurd: cannot have inducement if C knew the statement to be false Attwood v Small: cannot have inducement if C relied SOLELY on his own investigation Smith v Bush: court may deem it reasonable for C to have checked the statement, even if there is no strict duty to do so Pearson v Dublin: if the misrep is fraudulent, C's investigations will not be taken into account

Innocent Misrep - definition

If D can prove he is innocent under s2(1) MA 1967, the misrep will be classified as innocent

Statement of fact - silence

Keates v Cadogan: silence is not generally a statement of fact Dimmock v Hallett: partial disclosure amounting to half-truths is an exception to the silence rule, meaning silence can be a statement of fact when there is a half-truth

Unilateral mistake - signature

L'Estrange v Graucob: generally, a person is bound by the terms of any instrument which he signs. Lloyds v Waterhouse: a person will not be bound by a document signed as a result of a fraudulent misrepresentation as to the nature of the document, provided they still took reasonable care Foster v Mackinnon: a person may not be bound if they are blind, illiterate or senile (suffering from a form of mental incapacity)

Materiality

Pan Atlantic v Pine: we use an objective test for materiality: would a RP have been induced by the statement?

Statement of fact - statement of law

Pankhania v Hackney: a statement of law is a statement of fact

Mutual Mistake

Raffles v Wichelhaus: there will be no contract where there is a mistake as to the identity of the subject matter of the contract (X thinks he is buying the grey horse, Y thinks he is selling the black horse)

Remedies - Damages (Negligent)

Roscott v Rogerson: C can claim for all losses flowing from the negligent misrep Wagon Mound No1: damage must be reasonably foreseeable

Unilateral mistake - identity

Shogun v Hudson: must be a mistake as to identity and not attributes The presumption is that in distance selling you are concerned with a person's identity (Shogun), whereas in face to face selling you are concerned with a person's attributes (Lewis v Avery). In distance selling, the contract will be void for mistake, in face to face selling the contract will be voidable (have to look at any bona fide 3rd party rights)

Inducement - general

Smith v Chadwick: if statement is objectively material, inducement will be inferred Museprime v Adhill: possible to refute the inducement with evidence (D can prove C was not induced, C can prove he was subjectively induced if objective materiality test fails)

Defences

Standard Chartered v Pakistan Shipping: Contrib negligence under s1(1) LR(CN)A 1945 does not apply to fraudulent misrepresentations. Gran Gelato: contrib negligence applies to negligent misstatement and potentially negligent misrep.

Remedies - Rescission

Theoretically available for all forms of misrepresentation, rescinds the contract. Long v Lloyd: rescission not available if C affirmed the contract Leaf v Galleries: lapse of time may bar rescission Clarke v Dickson: rescission may become impossible Phillips v Brooks: rescission may be prevented by 3rd party rights s2(2) MA 1976: damages may be awarded in lieu of rescission for negligent/innocent misrep

Common Mistake

This is where there is a genuine agreement between the parties but both have made a common mistake which vitiates the agreement. This mistake can be: 1) A mistake as to the existence of the contract's subject matter (this is covered by s6 SGA 1979) 2)A mistake over a fact fundamental to the agreement. Bell v Lever Brothers states the test should be whether the state of the new facts destroy the identity of the subject matter as it was in the original state of the facts.

Statement of fact - continuing representations

With v O'Flanagan: if a continuing representation is made and becomes false before the contract has been entered into, the representor must correct the representation

Negligent Misrep - definition

s2(1) Misrepresentation Act 1967: D will be liable unless he can prove he believed the statement to be true and had reasonable grounds to do so D has burden of proof