Contract Law Misrepresentation.

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- Dimmock v Hallett

- H described his land as ‘fertile and improvable’ and D purchased it, but previous tenants had abandoned it as useless, which H didn’t mention. Courts said it was merely a ‘flourishing description’ of the land, not a misrepresentation – a ‘puff’.

- Carlill v Carbolic Smoke Ball

- Newspaper article, anyone catches flu by using smoke balls, Carlill did it. Asked for reward which was refused because CSB said it was a mere puff→ court held there was intention because they deposited £1000 in the bank for the reward.

Statement of the law isn’t enough to be actionable as everyone should know the law

- Pankhania v London Borough of Hackney

- The claimants purchased property induced by a representation that the current occupiers of the property were contractual licensees, whose occupation could be terminated on giving 3 months of notice. In fact the current occupant was in fact a tenant protected under the Landlord and Tenant Act 1954. This was a misrepresentation as to law which had previously been assumed not to be an actionable misrepresentation through analogy with case law based on restitutionary claims for mistake of law. The rule barring recovery for mistake of law was abolished by the House of Lords in Kleinwort Benson v Lincoln County council. The High court held that actions based on misrepresentation of law could now be actionable based upon that change of law. The claimant's action was therefore successful.

- Inducement

Definition: MISREPRESENTATION WILL ONLY BE ACTIONABLE UNDER CONTRACT LAW IF at least it was one of the reasons or the reason why the claimant entered the contract.

Hence if the claimant didn’t know about the statement, or knew it was untrue or it didn’t affect the claimant’s decision to enter the contract→ NO ACTIONABLE MISREPRESENTATION

UNTRUE STATEMENT MUST BE MADE: - before or during the formation of the contract or else NO INDUCEMENT

Mere suspicion/possession of info which could have revealed that was lie→COULD STILL RESULT TO ACTIONABLE MISREPRESENTATOIN

- Redgrave v Hurd

- R claimed that the company brought in £300 when it was actually £200, but gave H the papers for him to look through. H didn’t look through them and just signed. Court said R was liable because it is not a defence that H could or should have discovered the falsity of the statement before entering the contract. → Actionable misrepresentation

- Types of misrepresentation

- There are different types of misrepresentation because each type has a different remedy.

- Fraudulent

Definition: Tort of deceit. Someone is a liar and can be sued in defamation.

Fraud defined in the case:

- Derry v Peek

- A tram company genuinely believed it would get permission to use steam trams, and issued prospectuses claiming it had permission based on that belief. Courts said it wasn’t a fraudulent statement because they honestly didn’t know it was untrue.

→ If a person makes a false statement which he or she believes is not true at the time, this is fraudulent misrepresentation.

- Negligent Misrepresentation At Common Law

- It was established in Hedley Byrne v Heller & Partners

- Obiter: There can be a liability for negligent misrepresentation (misstatement) which causes financial loss when there was a special relationship between the parties.

- Negligent Misrepresentation At Statute

- Section 2(1) of the Misrepresentation Act 1967

- It says that when a party enters into a contract because of a misrepresentation made by the other party and suffered a loss, the innocent party has the right to claim for damages.

- Innocent Misrepresentation

From the 1967 Act

The other party can avoid liability for damages by proving that at the time of the formation of the contract by proving that the statement they said was true and they had reasonable ground to believe so hence they need to prove that they were not negligent → THEY HAVE THE BURDEN OF PROOF to prove that they were not negligent.

- Redgrave v Hurd

- Remedies for Misrepresentation

3 types of remedies:

- Rescission

- Damages

- Indemnity

- Rescission (to rescind= to revoke / cancel)

Definition: The innocent party could decide to set aside the contract. Rescission puts the parties back in the position they were before the contract.

- It goes with all four types of misrepresentation.

- The contract is VOIDABLE therefore VALID until or unless the innocent party decides to set it aside.

- If the contract is EXECUTORY (means that it will take effect in the future) the innocent party could choose not to perform his side of the agreement. → MISREPRESENTATION will prevent the other party from forcing the party to perform.

- In some cases when Rescission is given, damages are available BUT in other cases it is not, instead just rescission is given.

How to apply rescission?

- By informing the other party

- If they cannot do so because of the conduct of the defaulting party→ Other REASONABLE actions could be taken which proves that there was an intention to rescind the contract

- Car and Universal Finance Co Ltd v Caldwell

- Apply to court for a formal order of rescission (any property exchanged under the contract goes back to his/her former owner.

Bars to Rescission (to