It was seen when examining incorporation of terms (Chapter 6) that statements made prior to or during contractual negotiations are representations. Some of these may later become terms of the contract, whilst others remain mere representations. There are obviously remedies available for breach of a term (see Chapter 7 on types of terms and Chapter 15 on remedies), but this chapter will examine the situation where someone has been misled into making a contract by representations.
Where representations of facts prove to be untrue, and mislead a person into entering into a contract, there may be a situation of misrepresentation.
Definition
A misrepresentation is an untrue statement of fact, made by one party to a contract to another, which is not a term of the contract, has an inducing effect on it.
He said this was
‘a good little runner’
but it won’t go ...
An untrue statement of fact
To be actionable, a misrepresentation must be a mis-statement of an existing fact. It must not be:
• a mere commendation
• a statement of opinion
• a statement of future intentions
• a statement of law.
Mere commendation
It may be difficult to distinguish between a permissible commendation of an advertising nature and an actionable false statement. Obviously there is a difference between an advertisement stating, for instance, that ‘Camay soap will make you a little lovelier every day’ and one stating that if a product does not perform as specified, money will be refunded.
Statement of opinion
A statement may at first sight appear to be more factual that a mere commendation, but yet be hedged around with qualifications, such as ‘I think’ or ‘I believe’. Generally, such a view or opinion on a matter, which is unable to be proved, cannot result in an action for misrepresentation.
Dimmock v Hallett (1866)
An estate agent’s description of land as ‘fertile and improvable’ was held to be a mere commendation and not actionable.
Misrepresentation
Opinion is NOT a misrepresentation I think the
engine is
sound
≠
Figure 11.1
Bisset v Wilkinson (1927)
A seller of a sheep farm in New Zealand was said to be able to support about 2000 sheep. This was found to be untrue, but held not to be a
So, usually, a statement of opinion will not give rise to a claim in misrepresentation. However, what seems to be a statement of opinion may by implication involve a statement of fact; for example, a person may represent that he holds an opinion when it is found as a fact that he did not believe what he said. Obviously this will depend on reasonable evidence being available.
A statement of opinion may be regarded as a statement of fact in a situation where one party possesses greater skill or knowledge than the other, and represents by implication that he knows facts which support or justify the opinion.
A more recent illustration of this point came in the interesting case of Esso v Mardon (1976).
misrepresentation because the buyer knew that the seller had never farmed sheep in New Zealand, and was only voicing an opinion.
Smith v Land & House Property (1884)
A seller described the occupier of the property as ‘a most desirable tenant’. It was subsequently found that he had only paid rent erratically and under pressure. This was held to be a misrepresentation because the seller was the only person who could have known this information, so he had an extra duty to take care over his statements as his opinion would be regarded as authoritative.
Esso v Mardon (1976)
The defendant was thinking of opening a petrol station, and sought the advice of a specialist from Esso as to what would be the likely throughput of petrol (and therefore the likely profit). On the basis of these figures the defendant decided to go ahead with the purchase of the business. Between the initial negotiations and the eventual purchase the local authority insisted on the resiting of the petrol pumps, to the back of the site, with access off a side road. This meant that the trade was not as expected, and the throughput and takings were about half of those expected. The defendant decided that he could no longer carry on, and when Esso sued for repossession of the property, he made a counterclaim for misrepresentation. It was held that there was a misrepresentation by Esso for several reasons:
• the Esso expert possessed greater skill, and therefore responsibility, than the defendant, and was in possession of more material facts
Statements of future intentions
These are not generally actionable as misrepresentations. However, if it can be proved that the representor never intended to do the promised act at the time of making the statement, then the claim may be regarded as a statement of fact, that is to say a mis-statement of the state of the representor’s mind. Again, this raises problems of evidence, but if sufficient proof is available, then there is no reason why this should not be actionable.
• there was a relationship between the two where the Esso expert owed a duty to take greater care than the average person over his statements (see page 168 for more on this)
• there was a change in circumstances (of which Esso were aware) which meant that Esso should have revised the forecast throughput of petrol before the purchase of the business took place (again, see later for more on this).
Inntrepreneur v Hollard (2000)
A wrong statement of the takings of a pub was held to be a misrepresentation because it was made by a person who, it was felt, should know the accurate takings. This is moving a long way from the usual principles of contract law where the court looks for external evidence rather than trying to ‘read’ the minds of the parties.
British Gas v Nelson (2002)
British Gas made forecasts of sales to Nelson before forming a contract under which Nelson would install appliances on basis of the estimated number of clients. The figures were badly inaccurate and Nelson sued British Gas for misrepresentation as they did not have the quantity of work envisaged. British Gas were seen to be the party who held the accurate knowledge (or should have done) and were led liable.
Sykes v Taylor-Rose (2004)
This case contrasts with those above. It was held that the sellers of a house did not have a duty to tell the buyers that the house had once been the setting for a murder, even though this meant that, as a consequence, the buyers then resold the house at a loss of £25,000.
Edgington v Fitzmaurice (1885)
Shares in a business venture were sold, the publicity stating that the aim was to expand and improve the business. However, in letters to other people there was written evidence that the company planned to use the money raised by shares to pay off existing debts. These statements of
Statements of law
These have traditionally not been actionable, as they are not regarded as statements of fact. Also, people are generally taken to be as equals before the law and to have equal access to it (although this is obviously an ideal, rather than reality). However, some points should be noted.
• A lawyer (or similar person) mis-stating the law will not be absolved from liability for breach of professional duty of care on this basis. This is quite logical, given his professional expertise.
• A wilful misrepresentation of law may be actionable as a statement of opinion not actually held.
Difficulties may arise in deciding whether a statement is one of law or fact, and it may be a mixture of the two. For example, a statement that the Sale of Goods Act 1979 s.13 requires goods sold to correspond with their description is clearly one of law. If a shopper complains to a friend that the packet of biscuits she bought as custard creams were found inside to be ginger snaps, she is obviously making a statement of fact. However, if her friend then advises her that the item should be exchanged because the biscuits inside did not correspond to the description on the packet, this is a mixture of fact and law.
More recently, there has been some move away from the traditional position regarding wrong statements of law, as seen in the following case.