The Learning & Resource Section



Misrepresentation is an unambiguous false statement made by one party to another, which induces the other party to enter into the contract. Misrepresentation is a statement made before the contract was entered into—it is not part of the terms within a contract so a contract cannot be void. What this means, is the contract becomes voidable instead. The contract therefore still exists, but it is just set aside. Misrepresentation falls more under the ambit of Tort law because it is a civil wrong, however it affects the validity of a contract.

In order for a statement to be constituted as actionable misrepresentation, certain elements must be satisfied:

I. A False statement:

There must be a false statement of fact or law. It cannot be a mere statement of opinion unless the representor making the statement was in a position that they ought to have known the facts. (Smith v Land & House Property Corp)

3 Exceptions:

1. Certain special types of contracts are uberrimae fidei (they require the most utmost good faith therefore there is a duty to disclose material facts)

a. Certain contracts must deal in good faith where you have to reveal all material facts ( for example, insurance contracts)

2. When a statement was made which was true but false by the time the contract was entered into

a. With v O’Flanagan (1936):

3. Implied representations:

a. A statement may be implied by conduct which, if false may be a representation

i. Example: paying for goods with a cheque knowing you have insufficient funds

b. Half Truths

i. Express statement that’s misleading because of other facts known to the representor

c. Dimmock v Hallett (1866)

d. Spice Girls Ltd. Aprilia World Services (2002)

II. Of Existing or Past Fact:

  • Basic rationale is that the statements are either true or untrue
  • The following have traditionally been held not to be capable of amounting to misrepresentation:

1. Mere Puffs

a. Example: advertising slogans “this is the best law book in the world”

2. Statements of genuine belief or opinion

a. Bisset v Wilkinson (1927):

i. Statement that land could support 2000 sheep was merely sellers opinion—he didn’t actually know the true capacity

b. Hummingbird Motors v. Hobbs (1986):

i. Statement about ,mileage of a second hand car was not treated as a statement of fact because it was qualified as being correct “to the best of my knowledge and belief”

ii. The seller and buyer didn’t know truth

c. Exception: Esso v. Mardon (1976):

i. Statement about sales capacity of the gas station could have been treated as one of fact

ii. Statement of fact that opinion was held on reasonable grounds

iii. Given expertise of Esso, Mr. Mardon was justified on relying on it as such

d. Exception: Smith v Land and House Property Co. (1884):

i. Statement that hotel was let to “a most desirable tenant” even though the tenant was known to not be as such because even though he was a nice person he did not pay his rent

3. Statements of Intention/Statements as to the Future:

a. The law recognizes that one might legitimately change one’s mind

b. Statements about the future cannot be wrong at the time they’re made

c. Statement of future intention will be false statement of fact if the person making the statement did not, at the time of the statement, have that intention

i. Edgington v Fitzmaurice (1885):

1. Prospectus declared that funds subscribed would be used for the future development of the company when in fact the intention was to use them to pay off debts

ii. East v Maurer (1991):

1. Vendor of one of a pair of hairdressing salons fraudulently misrepresented that he did not intend to continue to work in the other salon retained except in emergencies

2. He did and took business from the one he sold

4. Statements of Law:

a. Not actionable as misrepresentations

b. Because in theory, everyone has access to the law and should verify such statements for themselves

III. Made by One Party to Another:

  • Generally representation will be made directly between contracting parties
  • If misrepresentation is made to a third party and objectively it is likely that the misrepresentation will be passed to the other contracting party—then it will be actionable

IV. Induces the Contract:

  • Person to whom the misrepresentation was made must have entered into the contract in reliance on the statement
  • If there was no reliance—the misrepresentation is not actionable

Attwood v Small (1838):

· Misrepresentation or exaggeration of accounts for mines

· Purchaser had his accountants and directors check accounts and because they were satisfied that they were accurate—he went ahead with the contract

· Realized after they were exaggerated and sought to rescind contract

  • Court held that because he got his own experts to check the reports he did not rely on the accounts upon entering the contract he relied on his own judgment

Types of Misrepresentation:

1) Fraudulent misrepresentation

2) Negligent misrepresentation

a. Negligent Misstatement

i. Hedley Byrne

b. Non-Fraudulent Misrepresentation

i. Under statute (Section 2 (1) misrepresentation act 1967.)

3) Innocent misrepresentation

1) Fraudulent Misrepresentation:

  • Established when a person makes a false statement which he knows is not true and has no belief in its truth or which he makes recklessly, not caring whether true or not

Derry v Peek

2) Negligent Misrepresentation

  • Established when a person makes a false statement which he may honestly believe to be true without reasonable grounds for believing it to be true

Two types :

1. Negligent Misstatement – action in Tort under the Hedley Byrne principles

Hedley Byrne: established what negligent misstatement is under common law


  • Special relationship between the parties
  • False statement of fact (skill and knowledge of type of advice)
  • Statement made negligently
  • Reasonable reliance (Hedley Byrne)
  • Defendant knew of reliance
  • Defendant assumed responsibility (Henderson v Merrett Syndicate)

2. Non-Fraudulent Misrepresentation – statutory

Under statute: Section 2 (1) Misrepresentation Act 1967

3) Innocent Misrepresentation

  • Originally, anything non-fraudulent.

· Now, anything only innocently repeating false statements.

  • Action under s. 2(2) of Misrepresentation Act 1967
  • There is no action at common law

Royscot v Rogerson : If you make a wholly innocent representation which you believed was true, but in fact was not, the only remedy available is rescission of the contract.

Remedies for Misrepresentation:

· Basic requirements are common to all misrepresentations

  • Rescission:

o Potential remedy for all types

o A party can rescind without a court order unless there has been partial or full performance then a court order must be sought (in this case each party will have to give back what they received under the contract)

o A party can also rescind the contract and claim damages

  • Bars to Rescission:

o Restitution is impossible if the benefit has been consumed

o Third party rights

§ The court cannot order the return of property if it has passed to a third party

o Affirmation

§ Upon discovering misrepresentation, may affirm the contract

§ Long v Lloyd (1958)

· seller made certain misrepresentations and the buyer after the sale noticed defects

· got the truck fixed and the seller agreed to pay for the repair of the defects

o Lapse of time

§ Leaf v International Galleries (1950):

· Plaintiff purchased painting from defendant based on innocent misrepresentation that it was a constable

· Years later asked for contract to be rescinded but lapse of time expired

o Had lots of time to check painting to see if it was real or not

  • Available remedies are dependent on the type:

o Fraudulent:

§ Rescission and damages in the tort of deceit

· the aim is to put the claimant in the position that he would have been had the misrepresentation not been made

· claimant may claim all losses stemming from having entered into the contract

o Negligent:

· Rescission and damages under s.2(1) of Misrepresentation Act 1967 and damages in lieu of rescission under s.2(2)

  • Common law negligent misrepresentation:

o A right to damages for loss causing negligent misstatements where there was a “special relationship”

  • Misrepresentation Act s.2(1)

o Claimant must prove there was a representation

o Burden is on defendant to prove that he had reasonable grounds to believe and did believe to the time of the contract that the facts were true

o Easier to succeed under this—common law rarely used

o Innocent:

Rescission and damages in lieu of rescission

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