Misrepresentation

CON.06 — Misrepresentation

Core definition. An actionable misrepresentation is an unambiguous false statement of existing fact or law, made by one contracting party to another, which induces the other to enter the contract. It is a vitiating factor — it makes the contract voidable, not void.

The four hurdles (all must be met):

• Statement of fact or law — not mere opinion, sales puff, or a statement of future intention. But: an opinion by someone with special knowledge can imply a fact (Smith v Land & House Property); a statement of present intention not held is a misstatement of fact (Edgington v Fitzmaurice); a half-truth or a statement falsified by later events (duty to correct: With v O'Flanagan) qualifies.
• Generally no duty of disclosure — silence is not a misrepresentation, subject to: half-truths, change of circumstances, and uberrimae fidei contracts (e.g. insurance).
• Addressed to the claimant.
• Induced the contract — the rep must be a reason (need not be the only one). No reliance if the claimant didn't know of it, didn't believe it, or relied on their own investigation (Attwood v Small). A material rep raises a presumption of inducement (Redgrave v Hurd — no duty to verify even when given the chance).

Three types and remedies:

• Fraudulent (Derry v Peek — knowingly, without belief in truth, or reckless): tort of deceit; rescission + damages (all direct losses, foreseeability irrelevant — Doyle v Olby).
• Negligent — Misrepresentation Act 1967 s.2(1): rescission + damages. Reverse burden — the rep must prove reasonable grounds for belief; damages measured on the fraud (deceit) basis (Royscot v Rogerson). This is the SQE workhorse — easier to claim than common-law Hedley Byrne negligence.
• Innocent (reasonable grounds, no negligence): rescission, or damages in lieu at the court's discretion under s.2(2).

Rescission — sets the contract aside ab initio. Bars: affirmation, lapse of time, third-party rights acquired, impossibility of restitutio in integrum.

Traps to nail:

• Royscot — negligent misrep under s.2(1) gives fraud-measure damages (no remoteness cap).
• s.2(2) damages are in lieu of rescission; you cannot get both, and they require a right to rescind to have existed.
• Misrep makes a contract voidable (cf. mistake → void).
• UCTA 1977 s.3 / MA 1967 s.3 (the misrep-exclusion section, substituted by UCTA 1977 s.8) — clauses excluding or limiting misrep liability must satisfy the reasonableness test.
• A statement of law now counts (Pankhania v Hackney LBC, applying the Kleinwort Benson mistake-of-law principle); don't apply the old fact-only rule.