SEM 2, LECT 3 - MISREP 2, REMEDIES - CONTRACT 24/01/2020 Types of Misrep - Fraudulent Misrepresentation - Negligent Misrepresentation - Innocent Misrepresentation - Negligent Misstatement - Developed in tort o Can be applied to tort Fraudulent Misrep - Tort of deceit - Comes from fraudulent intentions - Lord Herschell- Derry v Peek (1889)- it must be proven that the false representation was made knowingly, or without belief in its truth or recklessly, careless as to whether it is true or false. o Company wanted to raise capital, so issued prospectus ... " Issue of which power is needed to be used - Negligence is not sufficient, there has to be an element of dishonesty. Negligent Misrep - This is provided for under the Misrepresentation Act 1967. - Where a false statement is made, the burden of proof shifts to the defendant to show that there were reasonable grounds for believing that statement to be true. - If the defendant is unable to show reasonable grounds, negligence will be assumed. Innocent Misrep - Here, the misrepresentation is neither fraudulent nor negligent. - The party has made a statement with an honest belief in its truth and had reasonable grounds for that belief. Negligent Misstatement - Hedley Byrne & Co v Heller & Partners Ltd (1964). o A special (or fiduciary) relationship of trust and confidence must exist. o The party making the statement/providing advice/information has voluntarily assumed the risk. o There has been reliance on the statement etc. o Such reliance was reasonable. - Caparo Industries Plc v Dickman (1990). - Can induce liability, but must abide by these conditions Remedies - Common law and Equity
o Rescission o Damages o Indemnity - Statute - Misrepresentation Act 1967 o Damages Recession - Misrep renders the contract voidable, parties can walk away - Available for fraudulent, negligent and innocent misrepresentation. - Note, in certain circumstances, the court has a discretion under Sec 2(2) Misrepresentation Act 1967 to award damages in lieu of rescission for an innocent misrepresentation. - A contract is not automatically rescinded because of a misrepresentation. - Misrep can be a term of a contract, if it's only a warrant, the innocent party cannot walk away; but as a result of misrep, they can walk away anyway. - The contract is 'voidable' and not 'void'. - The choice as to rescind or not rests with the aggrieved party. - Until that choice is made, the contract remains valid and enforceable. - To rescind, the aggrieved party is expected to give notice to the other party - but note Car and Universal Finance Co Ltd v Caldwell (1965). Bars to Rescission - But, the right to rescission is lost by: Affirmation - Long v Lloyd (1958); Peyman v Lanjani (1985) · Become aware of misrep, prevents walking away o Lapse of time - Leaf v International Galleries (1950) - fake painting, rescinding of contract after 4 years ; Salt v Stratstone Specialist Ltd (2015) - leaf is no longer good