Contract Law - Week 14 lectures Misrepresentation 1 Misrepresentation . This refers to pre-contractual statements which induce a party to enter into a contract, but the statements turn out to be "false". . The law here is predominantly based on common law rules, however, there is now statutory intervention in the form of the Misrepresentation Act 1967 mainly as regards remedies. Issues • Definition · Basic Requirements · Exceptions . Misrepresentation by Action/Conduct · Misrepresentation by Silence Definition · A false statement of fact or law, made by one contracting party to another, which induces the other party to enter into the contract. Example . During negotiations for the purchase of a house, seller tells prospective buyer that the central heating system is 'excellent'. . Subsequently, the sale is concluded and buyer finds out the central heating system malfunctions. . If buyer was induced by that statement to enter into the contract, a claim will arise in misrepresentation. Basic requirements · False statement must have been made by one contracting party to the other. . It must be a statement of fact or law, not intention or opinion. . The statement must have induced the other party to enter into the contract. Requirement 1 - One contracting party to another . The normal rule is that the false statement must have been made by, or on behalf of, the other contracting party. . If a person enters a contract on the basis of a misrepresentation by a third party, it will usually have no effect on the contract. . However, note that liability can arise if a party makes a misrep to a third party, knowing it will be passed on to the other contracting party. Statement of fact or law, not intention or opinion · "I will get the car cleaned before I deliver it to you" - intention, not fact. . "This car is one of the best in the market" - opinion, not fact. · Bisset v Wilkinson (1927)
o Statement as to the number of sheep a piece of grazing land would support was held to be a statement of opinion. Exceptions . Opinion is contradicted by other facts known to the person giving that opinion Smith v Land and House Prop. Corp (1884) " Sellers of hotel told perspective buyers a tenant of the hotel was 'most desirable? " Turned out the tenant was in arrears of his went and on verge of bankruptcy " Opinion held to be misrepresentation · Opinion comes from an "expert" Esso Petroleum v Mardon (1976) · Opinion (or intention) is not genuinely held o Edgington v Fitzmaurice (1885) " "the state of a man's mind is as much a fact as the state of his digestion ... "- Bowen LJ " Company wanted to raise capital so issued prospective " Stated money raised would be to improve company and develop infrastructure " Actual intention was to pay off debts " Held because their intentions weren't genuine they were liable