University of Queensland Law of Contract B

University of Queensland

Law of Contract B

[Type the document subtitle]

Misrepresentation

Is it incorporated?

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  Importance to parties - Couchman v Hill (pregnant cow)
  
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  Strength of party position – Dick Bentley v Howard Smith (false information re car mileage)
  
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  Unlikely to be a term if representor tells representee they must verify truth (reverse Couchman)
  

Is it a mere puff?

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  Dimmock v Hallet – “fertile and improvable” – too vague
  
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  Carlil v Carbolic Smoke Ball – “three times daily for two weeks” & bank deposit – not mere puff
  
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  Mitchell v Valherie – “immaculate style” was mere puff, “perfect presentation nothing to spend” was not
  

Elements of Misrepresentation

1. False Factual Statement

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  Must be able to be presently true or false. Courts fearful of extending liability too far.
  
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  Conduct
  
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    Gordon v Selico – Actively did something to cover up dry rot
    
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  Opinion
  
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    Smith v Land and House Property Corp – Bowen CJ – when facts are not equally known, a statement of opinion by the party with knowledge is an implied statement that he knows facts justifying his opinion. Desirable tenants case.
    
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    Matters relevant to a determination of whether a statement of opinion is a misrepresentation:
    
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      The relative knowledge and position of each parties
      
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      The actual words used and meaning conveyed
      
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      Whether fraud is established. Did the person giving the opinion have a genuine belief in his or her opinion no matter how erroneous?
      
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    Bisset v Wilkinson – fraudulent if a) on facts reasonable person would not have held opinion or b) it was not actually held. On the facts it was honestly stated (had no prior experience).
    
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  Law - Eaglesfield – not actionable unless fraudulent. See also Taylor.
  
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  Intention
  
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    Edgington v Fitzmaurice – implied factual statement that you hold the intention.
    
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    Applied in Ritter.
    
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  Silence
  
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    Old rule – not actionable – Keates v Earl of Cadogan – caveat emptor
    
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    Half-truth
    
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      Dimmock v Hallet – “farms are fully let” was a misrepresentation because one had given notice. Your silence makes a statement which is otherwise true, untrue.
      
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    Becomes false
    
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      With v O’Flanagan – Clinic reduced in value between misrepresentation and contract. Duty to make sure statement is correct. See also Jones v Dumbrell.
      
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    Duty to disclose
    
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      Fiduciary relationships (McKenzie v McDonald), insurance contracts, sometimes guarantees.
      

2. Addressed to misled party

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  Peek v Gurney – Prospectus was addressed to first-time share purchasers, not purchasers of shares from others.
  
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  Sufficient that A communicates to X while intending misrepresentation to reach and induce (be acted upon) by B, or a class (including B), or even public at large (Peek).
  

3. Material

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  Would a reasonable person have been influenced by the statement to enter the contract? (Nicholas v Thompson).
  
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  Filters out trivial cases; does not apply where statement is fraudulent.
  

4. Inducement

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  Misrepresentation does not have to be sole reason, just has to be ‘real’ inducement (materially affected decision) (Edgington)
  
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  Redgrave v Herd – failure to verify accuracy of representation (even if easy) not a bar to claim.
  
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  No inducement where:
  
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    Unaware of misrepresentation
    
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    Knowledge of falsity – but, even if knowledge that part of statement is untrue, but does not know extent of falsity, might still be misrepresentation (Gipps v Gipps NSWCA)
    
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    Contracting on a different basis – Holmes v Jones – P became aware of false number of cows but later purchased property on totally different basis as regards stock.
    
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  Onus of proof
  
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    On representee (Gould).
    
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    If statement was by its very nature calculated to induce then there is an evidentiary presumption that you did rely.
    
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    May not apply outside fraud cases. Strongest in fraud cases (Smith v Kay per Lord Chelmsford LC).
    

Types of Misrepresentation

Fraudulent

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  Action in deceit; scenarios from Derry v Peek:
  
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    Making a statement knowing it is false
    
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    Making a statement without believing it is true
    
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    Making a statement recklessly/carelessly as to whether it is true/false (higher standard than negligence).
    
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  Krakowski v Eurolynx Properties – Can be fraudulent without evil motive/malice.
  
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  Inquiry always to subjective state of representor’s mind: question is whether the statement, as its maker believed it would be understood, conveys a true or false impression (Krakowski; John McGrath Motors).
  

Negligent

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  Hedley Byrne v Heller: A person to whom a negligent statement has been made could recover damages in tort if a special relationship existed.
  
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  MLC v Evatt – damages available for negligent misrepresentation. Also per Barwick CJ, no need for special skill (rejected PC).
  
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  Shaddock v Paramatta City Council - Gibbs CJ - a person should be under no duty to take reasonable care that advice or information which he gives to another is correct, unless he knows, or ought to know that:
  
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    the other relies on him to take such reasonable care and may act in reliance on the advice or information which he is given, and
    
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    it would be reasonable for that other person so to rely or act
    

Innocent

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  No damages, only rescission. Only where not negligent or fraudulent. Residual.