What Is a Misrepresentation in Contract Law

When entering into a commercial contract, a large number of statements are usually made in which the details and context of the transaction are exposed. If someone enters into a contract based on a statement that later turns out to be false, it is a false statement. An misled party who, knowing the misrepresentation, fails to take steps to circumvent the Agreement will be deemed confirmed by “Laches” as set forth in Leaf v. International Galleries; [78] [79] [80] and the applicant is prevented from withdrawing from the revocation. The time frame for taking such action depends on the nature of the misrepresentation. In the case of fraudulent misrepresentation, the period runs until the time when the false statement should have been discovered, while in the case of an innocent misrepresentation, the right of withdrawal may expire even before it can reasonably be expected that the representative will be informed. [81] Right of withdrawal from the contract, but no damage The defence against undue influence is particularly important in situations of incapacity for power and/or knowledge, such as the elderly. B persons with mental disabilities, fiduciary relations and/or minors. The exercise of undue influence to persuade a party to enter into a contract is a ground for annulment of the contract by a court. Although a remedy for negligent misrepresentation remains customary law, its application in contractual situations has been severely limited by § 2 (1) of the MA 1967. In 1991, Royscot Trust Ltd changed all that for Rogerson.[85] The court gave a literal interpretation of § 2 (which, to paraphrase it, provides that if a person has been misled by a negligent misrepresentation, then if the misrepresentation would be liable, if the representation had been made with fraudulent intent, the defendant is “thus liable”). The expression is supposed to be so responsible, has been read verbatim that it means “responsible as in the case of a fraudulent misrepresentation”.

For example, under the Misrepresentation Act 1967, damages for negligent misrepresentation are calculated as if the defendant had been fraudulent, even if he had been negligent. [86] While this is almost certainly not Parliament`s intention, no legislative changes have been made to address this discrepancy: the Consumer Rights Act, 2015 left the 1967 Act intact. This is called fraudulent fiction and also extends to tort liability. [87] Expressions of opinion are generally not sufficient to make false statements,[38] as it would be inappropriate to treat personal opinions as “facts,” as in Bisset v. Wilkinson. [44] There are several ways in which a party may attempt to limit its liability for misrepresentation. The reason why the judge in Dean v. Rise N`Bake concluded that the accountant`s testimony was a negligent misrepresentation and not a fraudulent misrepresentation was that he had acted with an honest belief that the figures provided to him were accurate and reliable. The accountant had no intention of misleading the buyers. If the misrepresentation is fraudulent or negligent, the court may award damages and terminate the contract, although if negligent misrepresentation occurs, the court will award, in its sole discretion, damages in lieu of the notice of withdrawal. If you are the representative, always let the representative know what assumptions you make in the presentation.

For example, if they are familiar with running a business, their expertise in a field, etc. Understanding what kind of false statement you can prove and whether you are entitled to a breach of contract instead is not always easy. A reckless misrepresentation is a misrepresentation made by a person who had no reasonable reason to believe it was true. Instead of outright lies, negligent misrepresentations are negligent factual claims that are false. When selling or marketing, each party has a duty to ensure that reasonable precautions are taken in presenting the facts. Prior to the Misrepresentation Act of 1967, the common law assumed that there were two categories of misrepresentation: fraudulent and innocent. The main effect of the Act is to create a new category by dividing innocent false statements into two distinct categories: negligence and “completely” innocent; and then indicates the corrective actions in relation to each of the three categories. [65] The meaning of the three categories is that the law recognizes that the defendant may have been more or less guilty; and the relative degrees of guilt lead to different remedies for the plaintiff. On the other hand, Lord Denning concluded in Leaf v.

International Galleries,[61] where a gallery sold paintings after falsely claiming that it was a constable, that even if there was no breach of contract or operational error, it was a misrepresentation; But five years had passed, the buyer`s right of withdrawal had expired. This suggests that the misled party, having relied on a false statement, has a duty to discover the truth “within a reasonable time”. In Doyle v. Olby [1969][62], a party misled by fraudulent misrepresentation was confirmed as NOT even after more than a year. During the framing phases of construction, buyers were informed that a four-stage contribution was required due to levelling issues. As a result, the buyers refused to complete the transaction and demanded the return of their deposit. In this case, the judge ruled in favour of the buyers and concluded that the amendments constituted a fundamental breach of contract. Buyers have been reimbursed for their deposit. This decision was upheld by the Ontario Court of Appeal. Otherwise, an act can be a misrepresentation and perhaps also in criminal acts of negligence and deception.

Although a claim for breach of contract is relatively simple, there are advantages to filing a parallel misrepresentation claim because, although refoulement is only possible for breach of the condition[17], termination is prima facie possible for all false statements, subject to the provisions of section 2 of the False Declarations Act 1967 and subject to the limitations inherent in an appropriate remedy. [18] The success of an exclusion or limitation of liability depends on whether the term of the Unfair Contract Terms Act 1977 (UCTA) – for business-to-business contracts – or the Consumer Rights Act 2015 (CRA) – is appropriate for business-to-business contracts. If an inaccuracy is part of the contract you signed, you may be able to sue for breach of contract. This may be easier to prove than fraudulent or negligent misrepresentations. An action for misrepresentation can only be brought by the party or the misled “representative”. This means that only those who were the intended addressees of the representation can sue, as in Peek v. Gurney,[51] where the plaintiff sued the directors of a corporation for compensation. The lawsuit failed because it was found that the plaintiff was not a representative (a party to the representation) and therefore a misrepresentation could not constitute protection. Damages for breach of contract are intended to put a plaintiff back in the situation in which he would have found himself without the breach. It is also possible to include losses resulting from the breach. It is important to carefully consider all losses that have occurred, para.

B example if a company has incurred costs as a result of the breach. A “representation” is a pre-contractual statement made during negotiations. [4] If a statement has been included as a clause in the contract[5], the usual remedies in the event of a breach of contract apply. Factors that determine whether representation has become a household name include: This type of misrepresentation is taken seriously by courts looking for evidence of: In the wake of the COVID-19 pandemic, it is important to understand how you can get into a contractual dispute and how to avoid these issues in the future. On October 7, 2020, Walker Law presented a webinar on contract law litigation, specifically to provide a summary of contract law cases applicable to COVID-19 and provide an overview of the legal aspects you may want to consider. Click here to watch the webinar on our Walker Law YouTube channel. Given the relative absence of guilt of a non-fraudulent defendant (who, at worst, is only negligent and, at best, “for reasonable reasons” can honestly believe that he told the truth), lawyers assumed for many years that for these two categories, damages would be paid on a contractual or tort basis that requires reasonable foreseeability of the damage. Negligent misrepresentation is not strictly speaking part of the law of misrepresentation, but an offence based on the 1964 obiter dicta in Hedley Byrne v. Heller [71], in which the House of Lords stated that a statement made negligently (if invoked) could be enforceable if there was a “special relationship” between the parties. [72] The Misrepresentation Act 1967 provides that damages may be paid in lieu of termination of the contract if negligent misrepresentation is proven. Damages for misrepresentation may also be ordered in connection with the damages suffered.

Again, the loss does not necessarily have to be reasonably foreseeable. Entire contractual clauses may also contain specific wording to prevent pre-contractual statements from giving rise to claims for misrepresentation. They will also often attempt to limit liability for misrepresentations with respect to statements and statements contained in the final agreement. .