Misrepresentaion

Table of Contents

Table of Contents 1

Table of Cases 2

Introduction 3

The Facts: - 3

Misrepresentation 3

Remedies for Misrepresentation 4

The Case 4

Conclusion 5

References 6

Bibliography 7

Table of Cases

Esso Petroleum v Mardon [1976].

Hedley Byrne v Heller [1964] (AC 465)

Marine & Dredging Co. Ltd. V A Ogden & Son (excavations) Ltd. [1978] QB 574

Derry v Peek (1889)

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

Introduction

In any case for misrepresentation claimants must prove the statements, which lured them into a contract, were false. In advising TLC Ltd. as to any possible action they may have for misrepresentation against Answer Ltd. the following facts bear consideration: -

The Facts: -

(i) Statements made by Answer Ltd. representative Valentino who stated that the system was "the number one system for reliability" which was "proving a success and about to be installed in a number of similar business to yours (TLC's)".

(ii) The fact that the Bizarre Pentium IV system was not installed in any other company that engages in TLC's line of business.

(iii) The features that were supposed to be 'part of the package' described in the Sales Literature did not work. As a result, TLC Ltd. incurred a total loss of Ј50,000 in addition to the deletion of customer records and misplacement of orders.

The aforementioned facts will be analysed with regard to advising TLC Ltd. on whether or not they have claim against Answer Ltd. on the grounds of misrepresentation.

Misrepresentation

Keenan and Riches (1998) define misrepresentation as a false statement made by one party to another, which induces the other party to enter into the contract. However, it must be noted that this statement/s must be factual in order for the claim to be actionable. The statement/s must not include sales puffs, statements of law, opinions or statements as to the future.

There are three types of misrepresentation: -

(i) Fraudulent Misrepresentation - When a person knowingly makes a false statement.

(ii) Innocent Misrepresentation - When a person makes a false statement and has reasonable grounds for believing it to be true.

(iii) Negligent Misrepresentation - A false statement by a person who has no reasonable grounds for believing it is true. In this event, a person can claim in two ways: -

a. Under Common Law - The House of Lords stated, obiter, that damages may be recoverable in tort for negligent misstatement which causes financial loss Hedley Byrne v Heller [1964] (AC 465). However, there could be liability where there is a 'special relationship' between parties, i.e. the representative has special skill and or knowledge to the matter and knows the other party will rely on such Esso Petroleum v Mardon [1976].

b. Under Statute - Section 2(1) of the Misrepresentation Act 1967 provides that where a person enters into a contract after a misrepresentation has been made to him by another, the innocent party would be liable for damages, unless the other party proves that at the time of the contract they had reasonable grounds to believe and did believe the facts represented were true.

Remedies for Misrepresentation

The effects of misrepresentation are to make the contract voidable thereby giving claimants the rights to rescind the contract, which would return them to the position they held before the contract was made. They can also claim for damages. Claimants must keep in mind that rescission can be barred for several reasons.

The Case

To establish a prima facie case on the grounds of misrepresentation, the application of the aforementioned laws in relation to the outlined issues must be examined. The first part of Valentino's statement can be considered as a sales pitch. As such misrepresentation cannot be attributed in this instance. However, the second part of his statement would require the knowledge of a specialist: the fact that he is a representative in the field makes him liable for negligent misstatement (Esso Petroleum v Mardon [1976] QB 801).

Nevertheless, this may prove difficult