Vitiating Factors:

Fraud à a form of misrepresentation Misrepresentation: One party enters into a contract on the basis of something that another party has told them, and this is not in fact true. From the outset, distinguish between misrepresentation (false statement of fact/law that induces a contract) and contractual term.

Difference between misrepresentation and warranty (a contractual term):

Warranty a. A term in the contract between the parties b. A separate contract between the parties

Leading decision on difference between representations and warranties: Heilbut, Symons & Co v Buckleton [1913] If you give a contractual promise a warranty, whether it is a term of an existing contract or forms the basis of a separate contract, and it is in fact not good, then the contract is broken and you can seek damages. If however, the statement is merely a representation, if it’s not true you don’t get damages for breach of contract. At most you can establish that the representation is actionable as a misrepresentation.

Lord Moulton on warranties: “animus contrahendi (intention to contract)” Þ Importance of the statement, the more important the statement the more likely for it to be a contractual form. Þ Reliance put on this statement by the parties. Þ Relative knowledge of the two parties, where a more experience + knowledgeable party makes a statement that he knows the other is relying upon, it is more likely for this to be a contractual term.

Oscar Chess Ltd v Williams [1957] Lord Denning: How you determine whether something is a warranty or a representation is done on an objective basis, doesn’t look into the minds of the parties but decides whether or not it would appear that they intended the statement to be a warranty.

Breach in warranty sounds in damages. Representation is not a contract but can claim damages. To get damages in representation, you must show that it is misrepresentation.

English law is hesitant to impose positive duties on people. Only occurs in a limited number of contracts, e.g. insurance – must disclose all relevant details. Mentality from idea that if you make a statement, you assume liability.

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When approaching exam questions: Q: Is this statement a warranty or representation? Þ Importance Þ Reliance Þ Relative knowledge If a contractual term is breached, it is a warranty. Is it a term of the contract? If no, then consider whether it is a representation.

If warranty: This will take you down a contractual route. You’re looking to see if it’s a term in the contract, and if so, has it been breached?

1. Is this statement a term? What is the nature of this term? Is it a term of the principle contract, or does it form a collateral contract on its own right? If no, no remedy.

2. Work out what the substance of this term was.

3. Has this term been breached?

4. If yes, are damages available + how to calculate? Calculate damages – measured on an expectation basis (put you in the position you would have been in if the contract had been performed) If the answer is no damages available, then it is not a warranty. Look instead at whether it is actionable as a misrepresentation.

If representation: Misrepresentation is a separate area of law; damages are calculated in tort. Different from damages for breach of contract. If a contract is entered in misrepresentation, the contract can be rescinded. Calculation of damages on tortious principles.

1. Is the statement actionable as a misrepresentation? Applicable criteria* must be applied. If not actionable as a misrepresentation, there is no remedy.

2. If yes misrepresentation, what type? o Fraudulent o Innocent o Negligent o Statutory* à Misrepresentation Act 1967 (too generous in contract to mistake) To establish which type of misrepresentation: a. Proof of which type b. Different remedies

3. What remedies are available? Determined by the type of misrepresentation. o Rescission o Indemnity (payment of expenses necessary to return party to their original position) o Damages

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Criteria for Actionable Misrepresentation*

1. Representation is false.

With v O’Flanagan [1936] The statement must be continuingly true. It cannot be true at the time of negotiation but not true when entering the contract.

Conlon v Simms [2006] Duty to disclose, failure of which is false.

2. Representation is statement of fact, not of opinion

Bisset v Wilkinson [1927] Vendor said how many sheep the land could hold. Was wrong but no damages because it was just opinion. "If a reasonable man with the vendor's knowledge could not have come to the conclusion he stated, the description of that conclusion as an opinion would not necessarily protect him against rescission for misrepresentation, but what was actually the capacity in competent hands of the land the purchasers purchased had never been, and never was practically ascertained."

Two exceptions:

a. Professional opinion on the basis of skill or expertise à Esso Petroleum Ltd v Mardon [1976] Having taken the position of and expert giving their opinion so it takes this out of the general principle that the representation must be one of fact, not of opinion. b. Opinion based on fact or exclusive knowledge à Smith v Land and House Property Corp (1884) "the facts are equally known to both parties, what one says to the other is frequently nothing but an expression of opinion . . . But if the facts are not equally well known to both sides, then a statement of opinion by one who knows the facts best involves very often a statement of material fact, for he impliedly states that he knows facts which justify his opinion." Bowen LJ

3. Representation is one of fact, not of intention

Wales v Wadham [1977] Statement of future intention is not actionable as a misrepresentation. Statement of intention = something you intend to do in the future.

Exception: Cannot misstate your current intention. [1885] Current intention is a fact, but whether it occurs in future is not actionable under misrepresentation. "there must be a misstatement of an existing fact; but the state of a man's mind is as much a fact as the state of his digestion. It is true that it is very difficult to prove what the state of a man's mind at a particular time is, but if it can be ascertained it is as much a fact as anything else. A misrepresentation as to the state of a man's mind is, therefore, a misstatement of fact."

4. Representation may be one of law

Pankhania v Hackney London Borough Council [2002] If the representation is one of law then it is actionable.

5. Representation is addressed to the party misled

Must be result of communications between misrepresentor + misrepresentee. This can occur through a third party à Commercial Banking Co of Sydney v Rh Brown and Co [1972]

6. Representation is intended to be acted upon, not “mere puff”

“Sales talk” is restricted à e.g. ‘whiter than white’, Ironbru slogan

7. Representation induces the contract, i.e. is material to the agreement

JEB Fasteners v Marks, Bloom and Co [1983] The statement was a factor which induced the contract.

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Types of

What is necessary for proof?

A. Fraudulent

Derry v Peek (1889) 1. Knowledge of its falsity; 2. Have no belief in the truth of the statement; or 3. Made recklessly If one of these criteria is met it is actionable. Followed in [1991].

If proven fraudulent, there are generous damages available. Cannot receive double recovery. Fraud is hard to prove. Unlikely that it is a fraudulent misrepresentation. Courts don’t like the find fraud, the criteria is more rigorous because of the criminal implications of fraud.

B. Innocent

Easier to prove, a statement was made but it was wrong. Difficulty is no right to damages, the most you would get is indemnity. Innocent misrepresentation might get rescission of contract + indemnity.

C. Negligence

In the 1960s, things changed in the law of misrepresentation.

Hedley Byrne & Co Ltd v Heller Partners Ltd (1964) Standard of proof: Þ Duty of care Þ Assumption of responsibility. "if someone possessed of a special skill undertakes, quite irrespective of contract, to apply that skill for the assistance of another person who relies upon such skill, a duty of care will arise. The fact that the service is to be given by means of or by the instrumentality of words can make no difference. Furthermore, if in a sphere in which a person is so placed that others could reasonably rely upon his judgment or his skill or upon his ability to make careful inquiry, a person takes it upon himself to give information or advice to, or allows his information or advice to be passed on to, another person who, as he knows or should know, will place reliance upon it, then a duty of care will arise." [at 502-503]

Esso v Mardon was also negligent. "if a man, who has or professes to have special knowledge or skill, makes a representation by virtue thereof to another - be it advice, information or opinion - with the intention of inducing him to enter into a contract with him, he is under a duty to use reasonable care to see that the representation is correct, and that the advice, information or opinion is reliable. If he negligently gives unsound advice or misleading information or expresses an erroneous opinion, and thereby induces the other side into a contract with him, he is liable in damages." [at 16]

Caparo Industries plc v Dickman [1990] Court tried to limit the number of people to which this duty can be passed.

Henderson v Merrett Syndicates Ltd [1994] 3 WLR 761 “if a person assumes responsibility to another in respect of certain services, there is no reason why he should not be liable in damages for that other in respect of economic loss which flows from the negligent performance of those services.” [at 776]

Concurrent duties in tort and contract, cannot recover on both of them. Decide by the proof required + statute of limitations period of time in which it is actionable.

D. Statutory Misrepresentation

Many countries did not adopt this Act. Section 1 removes some bars to rescission. S 2(1): When a person has entered into a contract after a misrepresentation of the other party, this reverses the burden of proof. Maker of the statement must show: 1. Reasonable ground to believe the statement was true 2. The statement was true or believed to be true… 3. At the time the contract was made.

Howard Marine and Dredging Co v Ogden & Sons Ltd [1978] Just need to show that one party entered the contract because of the statement.

Spice Girls v Aprilia World Service BV [2002] Spice Girls making a statement as a group when they signed on to represent Aprilia motorbikes, although they knew already one member was leaving. Supported by Gordon v Sellico (1986).

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REMEDIES FOR MISREPRESENTATION

Damages: Fraudulent misrepresentation à recover all losses. Innocent misrepresentation à rescission + indemnity

Is a representation actionable? 1. Are the criteria for actionable representation met? If not: Consider if there is a breach of contract. But generally the end, no relief. If yes… 2. What type of misrepresentation is it? There is different elements of proof involved. Some are more difficult than others, e.g. fraudulent is difficult to prove, negligent or statutory is easier. 3. What sort of remedy is available? Some are more desirable than others. Þ Damages: Calculated differently according to type of misrepresentation Þ Indemnity: Rescission of contract + certain monetary adjustments as though the contract was not entered into.

Whittington v Seal Hayne (1900) In innocent misrepresentation, indemnity is used to set the parties back to where they were before. Can have rescission of contract + damages as long as there is no double recovery.

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Fraud

Provides the most powerful remedy in damages.

Zurich Insurance Co plc v Hayward [2016] Fraudulent misrepresentation was a contributing factor to the settlement.

Doyle v Olby (Ironmongers) Ltd [1969] Lord Denning on awarding damages: Þ Purpose of the award of damages à Object of damages in break of contract is to put the plaintiff in as good a position as if the contract was performed, so the object is one of expectation. Þ In tort (fraudulent misrepresentation is tort) à To compensate for the wrong and restore the party to the position they would have been in but for the wrong, so the purpose is to compensate for the wrong. Þ Remoteness of the loss limits the damages that can be claimed.

Palsgraf v Long Island Railway Co (1928) says if a loss is too remote and unforeseeable, cannot claim damages for it.

However, fraudulent misrepresentation/deceit is a deliberate tort. Lying is a deliberate wrongful act, therefore the person who lied is responsible for all loss flowing from this act. Lying is bad, and the law punishes people who are bad. A lie means you assume all responsibility for all loss, foreseeable or not.

Smith New Court Securities Ltd v Citibank NA [1997] in the Supreme Court proved Lord Denning’s statement on fraudulent misrepresentation + damages available.

Clef Aquitaine Sarl v Sovereign Chemical Industries Ltd [2000] Approved the test of remoteness. No requirement that the fraudulent misrepresentation create a loss-making situation. If you can show that you would have invested in a more profitable venture if not for the fraudulent misrepresentation, you can claim loss of profits.

Standard Chartered Bank v. Pakistan National Shipping Corporation [2002] A director can be personally liable for making fraudulent representations on behalf of his company - and contributory negligence is not a defence to a claim for fraudulent misrepresentation. Defendant arguments: The payment would be made for other reasons à Court said this doesn’t matter Contributory negligence? “No one can escape liability for his fraud by saying I wish to make it clear that I’m committing this fraud on behalf of someone else…” Lord Hoffman

4 Eng Ltd v Harper and Simpson [2008] There are damages in deceit available for loss of a chance.

In Hedley Byrne & Co Ltd v Heller Partners Ltd: Unforeseeable loss is irrecoverable for careless misstatement. Negligent misstatement can only be liable for “reasonably foreseeable” losses (Esso v Mardon)

The court doesn’t hold person who does not reach the requisite duty of care with as much liability.

IFE Fund SA v GSI International [2007] Where there is a contract between parties and there is a claim under the Misrepresentation Act s 2(1) and under HB v H, they are meant to sue under s 2(1). è This is said in obiter, not clear why.

Misrepresentation Act 1967 reverses the burden of proof.

Question about s 2(1) is should we take fraudulent standard or negligent standard. Claimant must prove that they entered the contract because of the misrepresentation. Then the burden of proof shifts to the other party to show that the representation was true at the time of entering the contract.

Naughton v O'Callaghan [1990] Decided the standard was a tortious one, need to return parties to the original position.

Royscot Trust v Rogerson [1991] The extent of damages available under s 2(1) for negligent misrepresentation makes for the most advantageous claim for misrepresentation. Under the Act, the appropriate measure of damages was the same as that for common law fraud, or damages for all losses flowing from a misrepresentation, even if unforeseeable. "in view of the wording of the subsection it is difficult to see how the measure of damages under it could be other than the tortious measure and, despite the initial aberrations referred to above, that is now generally accepted."

Limitation of s 2(1): This is only applicable when another party to the contract makes the representation. Negligent misrepresentation can be made by anyone.

Forest International Gaskets Limited v. Fosters Marketing Limited [2005] [at paras 11-17] Approved the measure of damages in Royscot Trust v Rogerson. Question whether or not to grant leave of appeal. Said damages were too small to allow.

Yam Seng Pte Ltd v International Trade Corporation Ltd [2013] Lost profit from alternative investment is available as part of reliance measure to be awarded as damages.

Taberna Europe CDO II plc v Selskabet AF (formerly Roskilde Bank A/S) [2016] Talks about s 2(1) in obiter dicta. 1. Reaffirmation that K1 is what matters, even though there is a K2. 2. Contributory negligence is an available defence.

S 2(2) sets up the possibility of recovering damages in lieu of rescission.

Þ How do you calculate these damages? William Sindall plc v Cambridgeshire County Council [1994] The damages under s 2(2) are a discretionary award according to Lord Hoffman, and may be less than those under s 2(1). Damages under s 2(2) should never exceed those available for a breach of a warrantee.

Þ What happens if you have lost the right to rescind, can you still claim damages? Zanzibar v British Aerospace Ltd [2000] and Queensferry Ltd v Shand Construction Ltd (No3) [2000] say yes, but this is overturned in Salt v Stratstone Specialist Ltd in the Court of Appeals in obiter.

S 3 provides that where there is a business, this can only be don’t to the extent that the limitation is reasonable under s 11 of the Unfair Contract Terms Act.

S 62 of the Consumer Rights Act 2015 provides the means to determine whether a term is unfair.

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Rescission

Rescission is where the contract is voided ab initio, parties returned to the original position. è Car & Universal Finance Co Ltd v Caldwell [1965]

Inntrepreneur Pub Co (CPC) Ltd v Sweeney [2002] If a contract is rescinded, all of the contract falls, and cannot claim benefit of any part.

If you lose the right to rescind, the contract must exist to the end. Misrepresentation does not make a contract void, but makes it voidable because you could lose the right to rescind.

Bars on right to rescind:

Erlanger v New Sombrero Phosphate Co (1873) [at 1278] Þ If you wish to rescind K for misrepresentation, must be able to restore any benefit you have received. e.g. Modified a car bought under misrepresentation. Restoration doesn’t have to be exactly precise but must be able to restore.

Þ Lapse of time Salt v Stratstone Specialist Ltd [2015] Lapse of time in this case was not long enough. Also, the party who made the misrepresentation kept fobbing off Salt.

Long v Lloyd [1958] Affirmed K by words or actions (still using the lorry after finding out there was a misrepresentation about how good its condition was), lose the right to rescind the contract.

Peyman v Lanjani [1985] Do you need to understand the wrong? You need to understand that this wrong means you have the right to set aside the contract. If you don’t understand, you have lost the ability to rescind. Controversial.

Third Party Rights: If a third party (bona fide purchaser for value without notice of the misrepresentation) has entered the picture before the discovery of the thing that allows you to rescind the contract, the third party’s rights prevent the injured party in the original misrepresentation from setting aside the contract, and the contract is then good. In Phillips v Brooks, the jeweller is the original owner. The rogue’s entering into the second contract with the third party means the first contract can no longer be set aside. Intervention of the third party’s rights have occurred, so voidable contract has lost right to rescind. This allows rogue to pass title on to the third party.

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Summary

Type Contract Response Tort Response Innocent Rescission, maybe indemnity Nothing Fraudulent Rescission, maybe indemnity = Damages for deceit (Archer says cannot have both, no double recovery) Negligent Rescission, maybe indemnity Damages for negligent HB v H [1963] misstatement Statutory Statutory rescission Statutory damages (1967) s 2(1)

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Problem Questions re-examined

Problem 1: Artemus, Bruce and Clare

Is there a contract term? Is there a representation? Is it a misrepresentation? à False statement of fact, expert opinion or opinion to whom knowledge is exclusive to. Þ Identify which statement is a misrepresentation.

No statement is made between Bruce and Clare.

Artemis makes a statement of opinion to Bruce. Is it actionable under Esso v Mardon? No, not actionable as misrepresentation à No expert opinion and no exclusive knowledge. According to IFE v GSI must sue on s 2(1), not on negligence case law. Rebut to s 2(1) using reasonable grounds: Not fraudulent à honest belief Not negligent à reasonable grounds \ Innocent misrepresentation Remedy = rescission + indemnity, there is a problem because the book is now in Clare’s hands. Consumer Rights Act?

Problem 2: Chaucer, Dickens, Snoop and Swift

Misrepresentation is that Snoop pretends to be Chaucer à fraudulent misrepresentation. Not negligent because not done carelessly but rather, done deliberately. Damages in tort but Snoop is in prison (humanitarian vs practical reasons). Problem with rescission à Must collect from 3rd party. è Contract already rescinded earlier, Dickens acted immediately when he discovered the fraud and this was before the second contract was made.

Mistake à so fundamental, prevents any consensus between parties. Cundy v Lindsay contract void. Better criterion? Between 2 innocent parties, which of the two is more responsible for the loss.

What do you have to prove? What do you want to get? Misrepresentation – for before it is handed ot the third party Mistake – for after the third party gets it, to try to make the first contract void and get the thing back.

Ex: Gordon comes to Frank’s premises and expresses interest in a Ford Escort. Frank encourages Gordon to purchase it, saying that it is a “great little motor”, and “should give him years of trouble-free transport”. Frank knows that the car has a history of bad mechanical problems. Gordon buys the car but it suffers a serious mechanical breakdown as he is driving it home. He telephones Frank who agrees to pay for repairs. The day after the repairs are completed, it breaks down again and Gordon demands his money back. Advise Gordon.

Sue for damages, bring action under s 2(1) easier than fraud. Can he rescind the contract? No because Long v Lloyd.

Cases

Heilbut, Symons & Co v Buckleton [1913] AC 30

A firm of stock brokers are bringing out an issue of rubber shares. A prospective purchaser asks if the shares are any good. Firm replies, well they are bringing them out, assertion that they must be good. Q: Have the brokers warranted these shares to be good? (Contractual promise that these are good shares.) "They must be proved strictly. Not only the terms of such contracts but the existence of an animus contrahendi on the part of all the parties to them must be clearly shown." Lord Moulton A: Yes, it is a warranty so contract is broken.

Oscar Chess Ltd v Williams [1957] 1 WLR 370

"It is sometimes supposed that the tribunal must look into the minds of the parties to see what they themselves intended. That is a mistake. . . The question of whether a warranty was intended depends on the conduct of the parties, on their words and behaviour, rather than their thoughts. If an intelligent bystander would reasonably infer that a warranty was intended that will suffice." Lord Denning

With v O’Flanagan [1936] Ch 575

Sale of dentistry practice. Statement of the practice’s turnover during negotiation was no longer true when they entered the contract.

Conlon v Simmes [2006] EWHC 401

Bisset v Wilkinson [1927] AC 177

W agreed to purchase land from B for sheep-farming, in reliance on B’s statement that his ‘idea was that [the land] would carry two thousand sheep’. Neither party had at any time carried out sheep-farming on the land in question. B claimed for balance of the purchase price, W counter-claimed rescission of the contract on ground of misrepresentation. Judicial Committee of the Privy Council held that this statement was merely B’s honest opinion so claim for rescission failed.

Esso Petroleum Ltd v Mardon [1976] QB 801; 2 WLR 583; 2 All ER 5

Sale of a petrol station. Provided a forecast for sales form expertise. Misgauged so Mardon sued. Court found Esso had special knowledge and skill, so misrepresentation.

Caparo Industries plc v Dickman [1990] 2 AC 605

Henderson v Merrett Syndicates Ltd [1994] 3 WLR 761

Smith v Land and House Property Corp (1884) 28 Ch D 7

L bought a hotel as an investment at an auction form S. In the auction particulars, S stated that it was let to a ‘most desirable tenant’. However the tenant was in significant financial difficulty and had paid his last quarter’s rent only ‘by driblets under pressure’. S claimed specific performance of the contract, L counter-claimed for rescission. Held that the statement about the tenant was a misrepresentation, L’s claim to rescind succeeded.

Wales v Wadham [1977] 1 WLR 199

Mrs Wales when divorced, said she will never marry again. Met Mr Wadham and changed this. Not a misrepresentation. Criticism of this judgement because Mrs Wales had already met Wadham at the time, but did not then correct earlier intention.

Edgington v Fitzmaurice [1885] 29 Ch D 459

Pankhania v Hackney London Borough Council [2002] EWHC 2441 (Ch)

Applies the House of Lords’ decision in Kleinwort Benson Ltd v Lincoln City Council (1999) to contract law. Status of how land is used is a matter of law. Selling land, Council told purchaser that a person using the car park was a licensee (has less rights then a tenant so more desirable to purchaser) but actually he was a tenant.

Commercial Banking Co of Sydney v Rh Brown and Co [1972] 2 Lloyd’s Rep 360

JEB Fasteners v Marks, Bloom and Co [1983] 1 All ER 583

Vendors showed the purchasers the wrong accounts. The takeover was a flop. Said the purchase was induced by badly prepared accounts.

Derry v Peek (1889) 14 App Cas 337

Sale of trams.

East v Maurer [1991] 2 All ER 733

Seller said he had no intention of setting up a rival business à fraudulent

Hedley Byrne & Co Ltd v Heller Partners Ltd (1964) AC 465; [1963] 3 WLR 101; [1963] 2 All ER 375

Advertising firm HB trying to decide whether or not to advance credit to Easypower. Phones Heller (bank) to ask if they were credit-worthy. Reply: “In confidence and without responsibility on our part” Negligent misstatement of tort made them enter into a contract, because Easypower was not good for the credit. Law implies a duty of care on the party who makes the statement. Purely economic loss in tort, not tied to physical injury. Assumption of responsibility on Heller’s part.

Howard Marine and Dredging Co v Ogden & Sons Ltd [1978] 2 WLR 514; QB 574; 2 All ER 355

Third party Lloyds made a mistake about the dead weight of a ship.

Spice Girls v Aprilia World Service BV [2002] EWCA Civ 15, EMLR 27

Shooting advertising campaign as a girl band, gave the impression that they were staying together as a group.

Gordon v Sellico (1986) 278 EG 53

Whittington v Seal Hayne (1900) 82 LT 49

Land tax + loss of poultry from disease on the property. Could recover expenses, e.g. rates + property taxes (that otherwise the vendor would have had to pay anyway).

Zurich Insurance Co plc v Hayward [2016] UKSC 48

H injured at work, claimed against employer. Seemingly exaggerates injuries. Neighbours made witness statements to the insurer about this. Z went ahead and settled claim anyway, found later that they settled for 10x more than they could have. H at Z’s challenge, said Z always had doubts. Court held that the fraudulent misrepresentation was a contributing factor to the settlement. This allowed the statement to be actionable.

Doyle v Olby (Ironmongers) Ltd [1969] 2 QB 158

Palsgraf v Long Island Railway Co (1928) 248 NY 339, 162 NE 99

Railway conductor pulls a man onto the train. Man drops a package full of fireworks, which explode and cause a scales to fall on to of P. P loses, it was too unforeseeable so the law does not allow for it.

Smith New Court Securities Ltd v Citibank NA [1997] AC 254

Clef Aquitaine Sarl v Sovereign Chemical Industries Ltd [2000] 3 All ER 493

Standard Chartered Bank v. Pakistan National Shipping Corporation [2002] UKHL 43

Fraudulent bills of lading had been issued in order to rely upon letters of credit issued by the bank. The director signing the bills sought to avoid personal liability, saying it was the Act of the company. The defendant company also appealed on the basis that the claimant bank had itself been at fault and contributorily negligent. Held: In the case of a plaintiff, ‘fault’ meant ‘negligence, breach of statutory duty, or other act or omission’ which would give rise to a common law defence of contributory negligence. Under Edgington, if a fraudulent representation was relied upon, other reasons for making the payment were irrelevant. As to the liability of the director his representation was also that of the company, but he did not escape personal liability.

4 Eng Ltd v Harper and Simpson [2008] EWHC 915 (Ch)

IFE Fund SA v GSI International [2007] EWCA Civ 811

Taberna Europe CDO II plc v Selskabet AF (formerly Roskilde Bank A/S) [2016] EWCA Civ 1262

Taberna is an Irish investment company. They bought, on the promotion of Deutsche Bank a form of security note (investment vehicle, a contractual document) from regional Danish bank Roskilde. Roskilde could not function and went into bankruptcy. Taberna looked like they weren’t going to get any money at all, so they settled on another way à sue Roskilde for misrepresentation under s 2(1).

CA found that the way in which the security notes were sold, it’s clear the seller Deutsche Bank and Roskilde weren’t making any representations about the product. Court follows decision in IFE v GSI. This is a standard term in these kinds of contracts – you’re selling a financial product but you say you’re not representing or warranting anything about the performance of this particular investment product. Not an exclusion of liability for misrepresentation, saying you’re not making any representations. (a) Court looks at Royscot Trust v Rogerson in order to make the determination which contract is intended. Follows their measure of damages.

(b) Law Reform (Contributory Negligence) Act 1945 s 1 e.g. If you contributed to your injuries and increased them because you weren’t wearing a seatbelt, your damages are reduced to the extent which the court finds you proportionately responsible for this. If 25% of your injuries were contributed to by yourself, the damages will be reduced accordingly. Whether or not you could reduce damages on the basis that the other party was contributorily negligent? Para 48 of the judgement: In principle, such a defence should be available.

1. Reaffirmation that K1 is what matters, even though there is a K2. 2. Contributory negligence is an available defence.

Naughton v O'Callaghan [1990] 3 All ER 191

Royscot Trust v Rogerson [1991] 2 Q.B. 297

Andrew Rogerson wanted to get a second hand car on hire purchase. Maidenhead Honda Centre Ltd. They agreed to sell Mr Rogerson a car for £7600. Mr Rogerson paid a £1200 deposit. To finance the rest, Mr Rogerson got the help of a finance company called Royscot Trust Ltd. On Mr Rogerson's behalf, Maidenhead did the application forms. But it falsely stated (i.e. misrepresented) that the cost of the car was £8000 and the deposit being paid was £1600. Royscot approved the loan. Had accurate figures been stated, Royscot would not have done this as its policy was only to lend money for hire purchase if 20% of the total cost was paid in the deposit. Rogerson ran into financial difficulties and sold the car off dishonestly. He stopped paying instalments in September 1988, with £3,625·24 left to pay. Held, that whether or not the dishonest sale was foreseeable, the loss to the finance company of the unpaid instalments was recoverable from the car dealer under section 2(1) of the 1967 Act. The car dealer was liable for all the consequences of his misrepresentation, and therefore had to pay off the debts owed to Royscot Trust Ltd. Mr Rogerson's wrongful sale of the car was foreseeable and not a break in the chain of causation.

Forest International Gaskets Limited v. Fosters Marketing Limited [2005] EWCA Civ 700

Yam Seng Pte Ltd v International Trade Corporation Ltd [2013] EWHC 111 (QB); [2013] 1 All ER (Comm) 1321

William Sindall plc v Cambridgeshire County Council [1994] 3 All ER 932

County Council wants to sell land of school playing field to WS for development at high property value. Market crashes and it becomes a bad deal. Discovers sewage pipe beneath the field that was not disclosed because Council did not need planning permission when they built it so no records.

Salt v Stratstone Specialist Ltd (t/a Stratstone Cadillac Newcastle) [2015] EWCA Civ 745

Car & Universal Finance Co Ltd v Caldwell [1965] 1 QB 525

Caldwell (D) owned a Jaguar car. Sold to Norris for £975 in return for a £10 deposit and cheque for £965 (dishonoured the following day – 13th January). D immediately informed police and Automobile Association. Norris sold car to Motobella Co Ltd and then car changed hands multiple times. Plaintiff bought it in good faith. Car was seized by police a uthorities, interpleader proceedings followed (determining a matter of claim or right to property held by a third party). One of the issues was whether D had validly rescinded the contract for the sale of the car on the 13th of January. CA held that he had done so. They decided that the loss should be borne by the plaintiff purchaser on the basis that the seller had taken all reasonable steps to notify the fraudster of his decision to rescind the contract and on the ground that the fraudster did not wish to receive any communication from the defendant seller. Caldwell appears to be an example of rescission operating as a proprietary restitutionary remedy in the sense that the effect of rescission was to revest ownership of the car in Mr Caldwell.

Inntrepreneur Pub Co (CPC) Ltd v Sweeney [2002] EWHC 1060

Erlanger v New Sombrero Phosphate Co (1873) 2 App. Cas. 1218

Long v Lloyd [1958] 1 WLR 753

Long was induced to purchase Lloyd’s lorry in that it was in ‘exceptional’ and ‘first class’ condition. On the first journey after the sale, the dynamo broke and Long noticed several other serious defects. Lloyd was informed of these and offered to pay half the cost of some of the repairs. On the next long journey the lorry broke down completely. Long realised it was in a deplorable condition and claimed to rescind the contract. The second journey constituted an affirmation after becoming aware of the misrepresentation because Long knew then that the representation was untrue.

Peyman v Lanjani [1985] 2 WLR 154; [1984] 3 All ER 703

Person who suffered the wrong didn’t speak English.

Misrepresentation Act 1967

2 Damages for misrepresentation.

(1) Where a person has entered into a contract after a misrepresentation has been made to him by another party thereto and as a result thereof he has suffered loss, then, if the person making the misrepresentation would be liable to damages in respect thereof had the misrepresentation been made fraudulently, that person shall be so liable notwithstanding that the misrepresentation was not made fraudulently, unless he proves that he had reasonable ground to believe and did believe up to the time the contract was made the facts represented were true.

(2) Where a person has entered into a contract after a misrepresentation has been made to him otherwise than fraudulently, and he would be entitled, by reason of the misrepresentation, to rescind the contract, then, if it is claimed, in any proceedings arising out of the contract, that the contract ought to be or has been rescinded, the court or arbitrator may declare the contract subsisting and award damages in lieu of rescission, if of opinion that it would be equitable to do so, having regard to the nature of the misrepresentation and the loss that would be caused by it if the contract were upheld, as well as to the loss that rescission would cause to the other party.

(3) Damages may be awarded against a person under subsection (2) of this section whether or not he is liable to damages under subsection (1) thereof, but where he is so liable any award under the said subsection (2) shall be taken into account in assessing his liability under the said subsection (1).

(4) This section does not entitle a person to be paid damages in respect of a misrepresentation if the person has a right to redress under Part 4A of the Consumer Protection from Unfair Trading Regulations 2008 (SI 2008/1277) in respect of the conduct constituting the misrepresentation.

(5) Subsection (4) does not prevent a debtor from bringing a claim under section 75(1) of the Consumer Credit Act 1974 against a creditor under a debtor-creditor-supplier agreement in a case where, but for subsection (4), the debtor would have a claim against the supplier in respect of a misrepresentation (and, where section 75 of that Act would otherwise apply, it accordingly applies as if the debtor had a claim against the supplier).

3 Avoidance of provision excluding liability for misrepresentation.

(1) If a contract contains a term which would exclude or restrict— (a) any liability to which a party to a contract may be subject by reason of any misrepresentation made by him before the contract was made; or (b) any remedy available to another party to the contract by reason of such a misrepresentation, that term shall be of no effect except in so far as it satisfies the requirement of reasonableness as stated in section 11(1) of the M1 Unfair Contract Terms Act 1977; and it is for those claiming that the term satisfies that requirement to show that it does.

(2) This section does not apply to a term in a consumer contract within the meaning of Part 2 of the Consumer Rights Act 2015 (but see the provision made about such contracts in section 62 of that Act).

Cremdean Properties Ltd v Nash [1977] 244 EG 547

Cremdean Properties Ltd contracted to buy some property from Nash. They relied on representations by Nash’s agents that there was planning permission for 17,900 square feet (1,660 m2) of offices. The true figure was much lower. Nash sought to rely on a footnote clause in the invitation to tender document that said although statements (like the planning permission) ‘are believe to be correct their accuracy is not guaranteed’ errors would not annul the sale and pre-contract statements did not form part of the offer. Also, any purchaser should satisfy himself. Cremdean Properties Ltd argued that the exclusion fell within MA 1967 s 3 and was unreasonable. Bridge LJ held that the footnote was an exclusion clause within s 3.

Walker v Boyle [1982] 1 W.L.R. 495

Mr Walker negotiated with Mrs Boyle to purchase a house. During negotiations Mr Walker sent enquiries to Mr Boyle asking, ‘Is the vendor aware of any disputes regarding the boundaries, easements, covenants or other matters relating to the property or its use?’ Mrs Boyle asked her husband who answered ‘no’. But really there had been a long running dispute with the neighbour, which Mr Boyle incorrectly thought had been settled. Condition 17(1) of the contract said that, ‘no error, misstatement or omission in any preliminary answer concerning the property shall annul the sale’. Mr Walker brought an action for rescission based on misrepresentation. The question was whether Mr and Mrs Boyle could rely on the exclusion clause and whether it was reasonable under MA 1967 s 3. Dillon J held the condition fell foul of s 3 MA 1967. He held Mrs Boyle had not shown that the exclusion satisfied s 11 of the Unfair Contract Terms Act 1977 in this case. Neither party's solicitors directed their minds to condition 17, so it was not one which ‘ought reasonably to have been known to or in the contemplation of the parties’.

Concept of misrepresentation: Clark Goldring & Page Ltd v ANC Ltd (2001)

Requirements of an actionable misrepresentation: Lambert v Co-Operative Insurance Society Ltd [1975] 2 Lloyd's Rep 485

The representation must be false: Dimmock v Hallet [1860] LR 2 Ch App 21

The representation must be one of fact, not of intention: Limit No2 Ltd v Axa Versicherung AG [2008] EWCA Civ 1231

The representation must be intended to be acted upon: Peek v Gurney [1873] L.R. 6 HL 377 Andrews v Mockford [1896] 1 QB 372

The representation must induce the contract and it must \9in that sense) be material: Horsfall v Thomas (1862) 1 H & C 90 Smith v Chadwick (1884) 9 App Cas 187 Atwood v Small (1838) 6 Cl & F 232 (1881) 20 Ch D 1 Smith v Eric S Bush [1990] 1 AC 831

Fraudulent misrepresentation: Archer v Brown [1984] 2 All ER 267

Innocent misrepresentation: Newbiggin v Adam (1866) 34 Ch D 582

Negligent misrepresentation – the assumption of responsibility principle: Williams v Natural Life Health Foods Ltd [1998] 1 W.L.R. 830 Customs and Excise Commissioners v Barclays Bank Plc [2006] UKHL 28 Thomson v Christie Manson & Woods Ltd [2004] EWHC 1101

Concurrent duties in tort and contract: Henderson v Merrett Syndicates Ltd Williams v Natural Life Health Foods Ltd Wellesley Partners LLP v Withers LLP [2015] EWCA Civ 1146

Statutory misrepresentation: Resolute Maritime Inc v Nippon Kaiji Kyokai [1983] 2 All ER 1

Misrepresentation Act 1967 s 2(1): Foster v Action Aviation Ltd [2013] EWHC 2439 (Comm); appeal allowed [2014] EWCA Civ 1368 Cemp Properties (UK) Ltd v Dentsply Research and Development Corp [1991] 2 EGLR 197 BG Plc v. Nelson Group Services (Maintenance) Ltd [2002] EWCA Civ 547 CA Webster v Liddington [2014] EWCA Civ 560

S 2(2): Witter Ltd v TBP Industries [1996] 2 All ER 573. For a critique of the decision, see Beale, Points on Misrepresentation, (1995), 111 LQR 385. Pennsylvania Shipping Co v Compagnie Nationale de Navigation [1936] 2 All ER 1167 Erlanger v New Sombrero Phosphate Co (1873) 2 App. Cas. 1218 at 1278 T.S.B. Bank plc v Camfield [1995] 1 W.L.R. 430 Leaf v International Galleries [1950] 2 KB 86

S 3: Raiffeisen Zenbtralbank Osterreich AG v Royal Bank of Scotland plc [2010] EWHC 1392 (Comm) AXA Sun Life Services plc v Campbell Martin Ltd [2011] EWCA Civ 133 HIH Casualty & General Insurance Ltd v Chase Manhattan Bank, Chase Manhattan Bank v HIH Casualty & General Insurance Ltd [2003] UKHL 6, [2003] 1 All E.R. (Comm) 349