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Doctrine of Actionable Misrepresentation Is an Aspect of Contract

Info: 1777 words (7 pages) Essay
Published: 6th Aug 2019

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Jurisdiction / Tag(s): UK Law

The doctrine of actionable misrepresentation is an enormous aspect of the contract law. Is a statement of material facts that made by the representor to the representee, before or at the time they enter into a contract. Clearly, this statement might have induced the representee to enter into the contract, as the representor presenting him false or misleading evidences. It is divided into three different types, the fraudulent, negligent misstatement and innocent misrepresentation. This separation is according to the availability of damages that the party is able to award. Unmistakably, the representee will feel woelful if he relied upon this false statement and this statement become term of the contract. If that happen, then there is a breach of contract and the plaintiff has the opportunity to take action. If that statement did not become a term, consequently there is no remedy for breach. In other words, the terms of the contract are contractual statements and representations are pre-contractual statements which are able to become misrepresentation whether they are false. Thus, if an actual misrepresentation occurred, it must be proved by the claimant.

On the contrary, there are certain statements which might not considered as statements of material facts such as the statements of opinion, which are represent the opinion of the representor, as illustrated in Bissett v Wilkinson [1] , the statements of mere sales talks, also do not amount to a misrepresentation as it is obvious in the case of Dimmock v Hallett [2] . Additionally, a statement which expresses a future intention is considered as hypothesis rather than fact. Hence it cannot amount to misrepresentation. However, if that future intention is a wilful lie, as in the case of Edgington v Fitzmaurice [3] , then than untrue statement as to the future intention amounts to a misrepresentation of facts. Last but not least, the statement of law cannot amount to a misrepresentation as everyone has a duty to know the law. On the other hand, by following the case of Pankhania v London Borough of Hackney [4] , the statements of law can amount to a misrepresentation depending on the circumstances.

Nevertheless, in that particular case, Claudia might express an opinion. When she informed Anna about the permission of destroying the house she said that in her opinion it would be easy to get the planning allowance. Hence, Claudia in that case she expressed her opinion and she thought that, as her friends at the other house had got the permission she would be able to have it too. In Bisset v Wilkinson [5] , the defendant told to the plaintiff that this land would support 2000 sheep. Beside, no one had used this land as a sheep farm before. However, the plaintiff relied on the defendant’s opinion and bought the land and as a result the land failed to support 2000 sheep. Indubitably, that statement of opinion does not amount to misrepresentation as it is not a statement of fact but an express opinion of the defendant. Consequently, if Claudia expressed her opinion that it does not constitute a misrepresentation. But Claudia in that case has reasonable grounds to believe that her opinion is true as she knows that similar project happened to her friends. Hence, she has reasonable care and knowledge in saying that to Anna and therefore she is liable for misrepresentation according to Smith v Land and House Property Corp [6] .

Antithetically, if Claudia had known the truth, that the buildings in that area would need to develop in habitable standards and she did not present to Anna the whole truth, then she made a false representation to Anna with knowledge and this amounts to fraudulent misrepresentation. If Claudia was not aware of the true facts as in Notts Patent Brick and Tile Co. v Butler, [7] due to his failure to become aware of them then he is liable of misrepresentation. However as there was a fiduciary relationship between the parties, Claudia has a duty to disclose material facts. Although, Claudia had made a false representation to Anna and she might rely on it, she relied upon a self help manual. As reported by Attwood v Small [8] , the buyers relied on their agents who erroneously reported that the statements were correct but then they discovered their falsely. Hence, Anna relied in the manual and not at the representation of Claudia. As a result no misrepresentation occurred as she relied at the verification of the manual and in the absent of fraud she had no basic on which to rescind the contract.

As I mentioned above, misrepresentation is divided into three types. Fraudulent misrepresentation is the most serious form of misrepresentation. It concerned the tort of deceit, as it is stated in Derry v Peek [9] , and fraud is proved when it is obvious that the misrepresentation made knowingly or without belief in truth or recklessly regarding the truth. If an honest belief in the truth of the statement exists, then the misrepresentation is not fraudulent. Negligent misrepresentation could attract liability for financial loss in tort when the defendant carelessly makes a false statement to the plaintiff in such circumstances which is reasonable that the statement will be relied upon. In Hedley Byrne & Co.Ltd v Heller & Partners Ltd [10] , there is a special relationship between the parties which creates a duty of care. In Esso Petroleum & Co.Ltd v Marden [11] , as there is a special relationship between the parties, leads to the duty of reasonable care to see if the representation is correct. If it is false then the defendant is liable for negligent misstatement. Innocent misrepresentation is the least serious type, which is made in the belief that it is truth and there are justifiable grounds for that belief.

Correspondingly, the remedies which are available for misrepresentation depend on the type of misrepresentation that has resulted. These are rescission and damages. Rescission is in principle available for all the types of misrepresentation and the effect of this remedy is the reliance loss. Pursuant to this the parties are putting as far as possible into a position which they would have been if the contract had not concluded so that to ensure that the claimant is not unfairly enriched at the defendant’s expense. Damages can be claimed for fraudulent and negligent misrepresentation. In fraudulent the claim arises in the tort of deceit and the effect is the financial loss according to McConnel v Wright [12] and he can recover damages for all direct loss regardless of foreseeability as is stated in in Doyle v Olby [13] . In negligent misrepresentation a claim can be made under the doctrine which arises from Hedley Byrne and in that case the only thing that may recover is reasonable foreseeable loss. If there is a contract then the claimant is able to take an action under section 2(1) of the Misrepresentation Act [14] , in which the burden of proof shifts onto defendant. Supplementary, in fraudulent misrepresentation the measure of damages is the same as reported in Royscot Trust Ltd v Rogerson [15] . In innocent misrepresentation there is no common law action. However, the court has discretion to award damages in lieu of rescission under section 2(2) of the Misrepresentation Act, as in that case rescission is possible as an equitable remedy. This allows the court to substitute damages for rescission by considering the nature of misrepresentation and the effects that both parties would have if the contract were upheld, as well as the allowance of rescission or the award of damages in lieu.

Equally, as Anna in that case relied upon a self help manual and not at the representation that Claudia made to her then she is not able to claim any remedies from the law of misrepresentation, even thought a misrepresentation occurred recklessly or intended. However, the courts might invoke section 2(2) of the Misrepresentation Act [16] , in order to do what is equitable as they try to award the representee some protection for his reliance interest, because she induced to enter into a contract which had turned out to be a bad bargain for her. Besides, as in Attowood v Small [17] , the claimant did not take any remedies from misrepresentation as he relied on his own false representation. Thus he was not entitled to rescind or claim damages. Consequently, considering that case, Anna might not be able to claim any remedies as she induced by a self help manual and not by the words of Claudia.

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