Misrepresentation

The general principle of misrepresentation has been adopted by the United States and other former British colonies, e.g. India.

Factors that determine whether or not a representation has become a term include: Otherwise, an action may lie in misrepresentation, and perhaps in the torts of negligence and deceit also.

[19] Ordinary contracts do not require "good faith" as such,[20] and mere compliance with the law is sufficient.

[32][33] If a misstatement is made and later the representor finds that it is false, it becomes fraudulent unless the representer updates the other party.

This means that only those who were an intended recipient of the representation may sue, as in Peek v Gurney,[51] where the plaintiff sued the directors of a company for indemnity.

The action failed because it was found that the plaintiff was not a representee (an intended party to the representation) and accordingly misrepresentation could not be a protection.

Edgington v Fitzmaurice[54] confirmed further that a misrepresentation need not be the sole cause of entering a contract, for a remedy to be available, so long as it is an influence.

Later, having signed a contract to join Redgrave as a partner, Hurd discovered the practice generated only £200 pa, and the accounts verified this figure.

[60] By contrast, in Leaf v International Galleries,[61] where a gallery sold painting after wrongly saying it was a Constable, Lord Denning held that while there was neither breach of contract nor operative mistake, there was a misrepresentation; but, five years having passed, the buyer's right to rescind had lapsed.

This suggests that, having relied on a misrepresentation, the misled party has the onus to discover the truth "within a reasonable time".

In Doyle v Olby [1969],[62] a party misled by a fraudulent misrepresentation was deemed NOT to have affirmed even after more than a year.

(Although short and apparently succinct, the 1967 Act is widely regarded as a confusing and poorly drafted statute which has caused a number of difficulties, especially in relation to the basis of the award of damages.

Negligent misstatement is not strictly part of the law of misrepresentation, but is a tort based upon the 1964 obiter dicta in Hedley Byrne v Heller [72] where the House of Lords found that a negligently-made statement (if relied upon) could be actionable provided a "special relationship" existed between the parties.

[73] Subsequently in Esso Petroleum Co Ltd v Mardon,[74] Lord Denning transported this tort into contract law, stating the rule as: ...if a man, who has or professes to have special knowledge or skill, makes a representation by virtue thereof to another…with the intention of inducing him to enter into a contract with him, he is under a duty to use reasonable care to see that the representation is correct, and that the advice, information or opinion is reliable'.

[78] A misled party who, knowing of the misrepresentation, fails to take steps to avoid the contract will be deemed to have affirmed through "laches", as in Leaf v International Galleries;[79][80][81] and the claimant will be estopped from rescinding.

Given the relative lack of blameworthiness of a non-fraudulent defendant (who is at worst merely careless, and at best may honestly "believe on reasonable grounds" that he told the truth) for many years lawyers presumed that for these two categories, damages would be on a contract/tort basis requiring reasonable foreseeability of loss.