MISREPRESENTATION AND MISTAKE REVISION SHEET MISREPRESENTATION (1) Introduction (a) What is a misrepresentation? A misrepresentation is a false representation, by words or conduct, of fact or law, which is addressed to the other party and on which it relies, normally by entering into the contract. Note - fundamental distinction between misrepresentation (which gives rise to liability) and non disclosure (which generally does not). (b) A note on vitiating factors: Void/voidable contracts Misrepresentation sits alongside other 'vitiating factors' (such as undue influence), which make the contract voidable, i.e., subject to the remedy of rescission. A voidable contract is one which the innocent party can choose to rescind, but remains valid unless rescinded. The effect of rescission is to invalidate the contract from the start. A void contract (e.g. for mistake in limited circumstances) is invalid from the start and creates no contractual obligations. (c) Representations, Terms and Collateral Warranties If the statement is not intended to have contractual effect, the misled party will not be entitled to claim damages for breach of contract since no contractual stipulation has been broken. (Any remedy he may have will be for misrepresentation) However, a remedy for breach of contract would be available if the statement is (i) a term of the main contract, or (ii) constitutes a warranty collateral to the main contract. (i) Contract term or mere representation? (1) Why does it matter? Main difference concerns the remedy that is available if the statement turns out to be false. If a term, C can get damages for breach of contract calculated on the expectation measure: the aim is to put C into the position he would have been if the promise had been performed (i.e. if the statement had been true). · Calculate: o How much expected to make - how much made Value of what thought painting was (10k) - actual value of painting (200)
If a mere misrepresentation, rescission is available, and potentially damages depending on the type of misrepresentation. Where damages are recoverable under e.g. the tort of deceit or the Misrepresentation Act 1967, they are calculated on the tort measure: the aim is to put C into the position he would have been if the representation had not been made. · Calculate: o Contract price - actual value o How much paid (1000) - how much it is worth (200) (2) How do we determine what it is? Test: Based on the intention of the parties, objectively assessed Heilbut, Symons & Co v Buckleton [1913] AC 30 Facts: D, Heilbut et al, rubber merchants were contracted by C to enquire about shares purchasing. D responded positively - insinuated the creation of a new rubber company, which persuaded C to make a sizeable purchase for shares. - The subsequently formed rubber prod company proved to have far fewer available resources than anticipated. - C sued for breach of warranty - the company's original representation had implicated far greater resources. Held: at first instance, the court contended that H had made