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Misrepresentation | Free Law Essays

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Misrepresentation | Free Law Essay

A: Advise

Donna whether there are any remedies available against Gianni.

B: ‘The rules

the courts have developed to decide the level of damages to be awarded for

breach of contract are arbitrary and no consistent principle can be discerned

from the decisions made by the courts.’ Discuss.

Question A:

A misrepresentation is a false

statement of fact, inducing another to enter into a contract. Misrepresentation can take various forms, such as fraudulent or negligent, the latter falling

under innocent misrepresentation and each carries with it particular rights to

damages in court and different burdens of proof. To activate rescission or

claim damages, the representee (the one who is induced into the contract) must

involve the court to rescind the contract or to grant relief which may have

flowed directly from rescission, such as monies paid. Rescission may also clear

the representee from obligations enforceable under the terms of the contract.

Only under fraudulent or

negligent misrepresentation, meaning fraud or negligence must be proven, can

damages be claimed. Statutory misrepresentation allows the representee to claim

damages under a contract merely by proving that the representee suffered loss

(Misrepresentation Act 1967, s.2(1)).

When making a claim under misrepresentation, the first thing to be proven is that the representor made a

statement which qualifies as a misrepresentation. Gianni must have made a

misrepresentation in order to allow Donna to bring any claims. A representation

is a statement made to a representee by a representor, related to the

representee by way of verbal or written denial, affirmation, description of

otherwise by matter of fact. A clear distinction must exist between who the

representee and representor are, required to be two distinct persons in

substance and in law (Re Ambrose Lake Tin and Copper Mining Co, ex p Taylor,

ex p Moss (1880) 14 ChD 390 at 396-397, CA). Here, Gianni is the

representor and Donna the representee, clearly two distinct individuals. Gianni

made five primary statements, which Donna could claim were subject to

misrepresentation. The first was that Gianni told Donna that the purchase would

be the best bargain in town. This is a statement, but not one of fact per se. A

statement which qualifies as mere advertising puff, a statement made to promote

the sale of a seller’s goods, does not qualify as a representation (Fenton v

Browne (1807) 14 Ves 144, McKeown v Boudard-Peveril Gear Co (1896) 65 LJ Ch

735, CA). Gianni is the seller and in an attempt to sell his good, he will

provide the ‘best’, ‘most-valued’, ‘great idea’ type jargon that will promote

his sale and as advertising does by its very nature, induce a buyer into

buying. Every buyer will be aware of these gimmicks and should not be persuaded

that these are true statements of fact.

Gianni also

told Donna that ‘on Saturdays especially, you can hardly move in the place,

it’s so busy.’ This is a statement of opinion or belief bordering on fact and

therefore qualifies as a representation of opinion (Edgington v Fitzmaurice

(1885) 29 ChD 459 at 483, CA; Angus v Clifford [1891] 2 Ch 449 at 470, CA).

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Donna could attempt to argue that the statement made was a statement of fact

but in all reality, the statement would rather qualify as that of one made in

belief or opinion as what one person qualifies as an opinion of how busy it is,

is not the same as that of another person’s perception of busy. Gianni did

qualify the statement by stating that the place is so busy you can hardly move,

but again this may also be a statement of opinion. This could also border on a

statement made a mere advertising puff to make Donna believe it is a good

purchase and to attract her to the transaction. Donna should have known how busy

the store was on a Saturday as she should have had some experience with the

location and the store before purchase. In Smith v Land and House Property

Corpn ((1884) 28 ChD 7 at 15-16 CA) it was decided that where the representor

and the representee are both privy to the same facts, then it can not be

determined that the representee was induced by an opinion.

Gianni also informed Donna of the

monthly profits which of course she would have wanted to know as it would have

severely induced her to enter into the contract as the primary reason for the

purchase would have been financial and business development. Donna did not

check the account, despite Gianni advising her to do so and ultimately it

transpires that the statement made by Gianni was incorrect and the account are

actually at 600 for the last five months rather than 6,000 per month. Gianni

genuinely believed in his statement but made it wrongly and Donna could

potentially claim under negligent misrepresentation as Gianni, being the owner

should have known the answer to this particular question, holding expertise by

his position. This is touched upon later.

Gianni told Donna that planning

permission had been applied for. Later Gianni found out this had been denied

yet failed to inform Donna of this. Gianni also told Donna she should have no

problem in converting the cellar into an 80-seat restaurant. Silence does not

qualify as a misrepresentation but by not telling Donna about the new

information that he had received, Gianni was engaging in a continuing

misrepresentation as he was continuing to maintain that which he initially

said, despite this now having become untrue and therefore a misrepresentation.

Had Gianni never made any mention of planning permission, then his complete

silence throughout the transaction would have never amounted to

misrepresentation (Stikeman v Dawson (1847) 1 De G & Sm 90 at 104).

The second statement, also being a forecast can also be deemed a

misrepresentation as it is a statement that the representor expects (Re

Metropolitan Coal Consumers’ Association Ltd, Karberg’s Case [1892] 3 Ch 1 at

11, CA).

A misrepresentation is fraudulent

if the representor knew or believed the statement to be false when made. Even

non-belief in the truth of a statement will be seen as fraud (Taylor v

Ashton (1843) 11 M & W 401 at 415). Any statement made by Gianni which

he did not totally believe was 100% true, will have been made fraudulently

under the rules of civil liability. This is the same as if the statement would

have been made knowingly falsely. The statements made by Gianni with regard to

planning permission and the capacity ability of the store were made

fraudulently as Gianni will have been deemed to have expertise in these areas

and if he did not wholly believe in the truth of what he was saying. Donna will

have claims in the court for the two statements made.

Innocent misrepresentation can

results in a cause of action both at common law and under the Misrepresentation

Act 1967 (Candler v Crane, Christmas & Co [1951] 2 KB 164). There

are two classes of innocent misrepresentation which also known as

non-fraudulent misrepresentation. The first is misrepresentation made without

fault which would allow rescission as a right to remedy and the second is made

through negligence and would give the court the right to grant damages and

rescission.

If Gianni attempted to

incorporate the representations he made into the contract, thereby having Donna

agree to accept them by signing the contract, he does not remove his liability

under misrepresentation as making the statement a contractual term does not

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stop the statement from being misrepresentation and giving Donna redress in the

courts.

Donna could seek redress under

both negligent and fraudulent misrepresentation. Donna could also get the

courts to declare the contract rescinded. This means the contract is still

valid but can be set aside by either party to the contract. It does not render

the contract void as it is. Donna may not want to set the contract aside as she

would lose the property and would rather just desire compensation for the

losses she suffered rather than be returned to the position she was in before

taking on the contract which was without the property. Donna invested time, and

will have lost money as well as potentially reputation amongst any existing

clients and this can only be compensated in damages. Donna would be seeking

compensation under both negligent and fraudulent misrepresentation. The level

of damages that are available to Donna will be reflected in the loss she

suffered from the representation that were made which were misrepresentations.

Question B:

When discussing the damages a

claimant can claim in court, these can take a wide variety of forms. Tangible

assets, which includes actual hard cash, are clearly included, being easily

replaced by a cash insertion from the defendant under order of the court. Other

injuries can also be covered by damages, such as loss of feelings, reputation,

suffering inconvenience and stress and even other mentally recognised disorders

or discomforts by damages (Archer v Brown [1985] QB 401). Further

damages can include other side-effects which may have been caused by entering

into the contract. These include, loss of the contract which was entered into

on the basis of the misrepresentation, loss of money paid to any third party

involved, loss of profits (Barley v Walford (1846) 9 QB 197),

appointments or earnings or injury to property, expenses or any detriment which

would offer pecuniary compensation can also be (Mullett v Mason (1866) LR 1

CP 559). Further, and finally, if the claimant’s mere belief in a

representation causes any physical or mental damage, then this can also be

considered by the court in the calculation towards damages (Wilkinson v

Downton [1897] 2 QB 57).

The claim under

fraudulent and negligent misrepresentation are tortious claims. A tortious

claim, subject to the damage for deceit, can exist based on a duty to care,

independent of any contractual or fiduciary duties (Le Lievre v Gould [1893]

1 QB 491, CA). In order to establish a duty of care, a causal connection

needs to be established between the loss that was suffered by the claimant and

a breach of duty of care engaged in by the defendant. The breach of duty must

have directly caused the loss suffered. The remoteness of the damages suffered

also plays a role, as if the damages are too far removed from what would have

come from the misrepresentation made, then the losses in question would not

qualify as being compensated (Hedley Byrne & Co Ltd v Heller & Partners

Ltd [1964] AC 465, Derry v Peek (1889) 14 App Cas 337 at 359). Often this

is again a question for the courts and is often left to their interpretation of

previous case law as to whether the loss qualifies. Not only are the

calculation of actual damages left to the discretion of the court but also the

causal connection. This allows a huge room for error on part of the court and

individual interpretation by judges. The judicial system in the UK provides

some check on this by allowing an appeals system to work. One court is under

the scrutiny of another, excepting of course when a claimant reaches the House

of Lords which is the final point of judgment.

Various defences exist for the

defendant to minimise or annihilate any liability. The claimant’s knowledge of

the truth is one, as a defendant who knows the truth is not being deceived and

so does not suffer from misrepresentation (Eaglesfield v Marquis of

Londonderry (1878) 26 WR 540 at 541, HL).This knowledge of claimant

must be wholly complete and not partial, a fragmentary knowledge of the true

facts is not enough and would not qualify as such, relieving the defendant. The

knowledge must also be actual and not implied, meaning the claimant must have

direct access to the knowledge and it must be shown that the claimant actually

knows it rather than be deduced to know it because the information was

available. The claimant will not suffer from not retrieving information that

was available.

The general rules applied in

quantification by the courts is to return the claimant to the position he would

have been in had the representation not been made. Although the loss need not

be foreseeable, it must have been directly caused by the misrepresentation so a

causal connection is often important to obtain as was outlined earlier (Smith

New Court Securities Ltd v Citibank NA [1997] AC 254 at 267). The claim for

deceit, which is the tortious claim under which negligent and fraudulent

misrepresentation both fall, is a measure of equitable damages under which

damages are payable to compensate the entire loss sustained, regardless of

returning the claimant to the position in which they would have been had the

misrepresention not occurred. This loss that is sustained, is calculated

according to the entire loss sustained in the past and the loss sustained by

the claimant in the future, clearly an estimation and to the discretion of the

courts once again.

When the court assess damages

where property or assets have been lost by the claimant, which are not

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recoverable due to the nature of the asset, then the calculation of the sum due

under damages, is done via addition of present values. If a claim is made under

contract and the situation exists where the claimant paid monies and in return

for this payment did not receive anything, then the claimant will receive the

monies returned in full. Interest, business reputation, time lost and effort

inserted are all aspects which are not included in the calculation and so are

lost to the claimant.

The court is free to decide how

much is awarded, what is awarded and allowed to be awarded under the

established causal connection found by the court. This total discretion gives

the court much room to play, and could result in a plethora of outcomes both

capable of surprising the claimant and the defendant. However, the court is

regulated and the system would not function is certain rules, especially those

set in precedence were not followed. The award of damages, however, varies from

case to case as the evidence adduced and presented is always so variant.

Ultimately, the courts attempt be fair and equitable and in doing so will apply

all the facts of the case to the outcome granted.

References:

  • Angus v Clifford [1891] 2 Ch 449

    at 470, CA

  • Appleby, G. (2001). Contract Law. Sweet and Maxwell:

    London.

  • Archer v Brown [1985] QB 401
  • Barley v Walford (1846) 9 QB 197
  • Bell v Lever Bros Ltd [1932] AC

    161, HL,

  • Bisset v Wilkinson ([1927] AC 177, PC
  • Candler v Crane, Christmas & Co [1951] 2 KB 164
  • Derry v Peek (1889) 14 App Cas 337 at 359
  • Eaglesfield v Marquis of Londonderry (1878) 26 WR 540 at

    541, HL

  • Edgington v Fitzmaurice (1885) 29 ChD 459 at 483, CA
  • Esso Petroleum Co Ltd v Mardon [1976] QB 801, [1976] 2 All

    ER 5, CA

  • Fenton v Browne (1807) 14 Ves 144
  • Halsburys Law Online: www.butterworths.co.uk/halsburys.
  • Hedley Byrne & Co Ltd v Heller & Partners Ltd

    [1964] AC 465

  • Le Lievre v Gould [1893] 1 QB 491, CA
  • McKeown v Boudard-Peveril Gear Co (1896) 65 LJ Ch 735, CA
  • Misrepresentation Act 1967, HM Stationery Office online.
  • Mullett v Mason (1866) LR 1 CP 559
  • Re Ambrose Lake Tin and Copper Mining Co, ex p Taylor, ex

    p Moss (1880) 14 ChD 390 at 396-397, CA

  • Re Metropolitan Coal Consumers’

    Association Ltd, Karberg’s Case [1892] 3 Ch 1 at 11, CA

  • Smith, J.C. and Thomas, (2000). A Casebook on Contract.

    Sweet and Maxwell: London.

  • Smith v Land and House Property Corpn (1884) 28 ChD 7 at

    15-16, CA, per Bowen LJ

  • Smith New Court Securities Ltd v Citibank NA [1997] AC 254

    at 267

  • Stikeman v Dawson (1847) 1 De G & Sm 90 at 104
  • Taylor v Ashton (1843) 11 M &

    W 401 at 415

  • Wilkinson v Downton [1897] 2 QB

    57

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