University of Queensland Law of Contract B



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University of Queensland

Law of Contract B

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Misrepresentation

Is it incorporated?


  • Importance to parties - Couchman v Hill (pregnant cow)

  • Strength of party position – Dick Bentley v Howard Smith (false information re car mileage)

  • Unlikely to be a term if representor tells representee they must verify truth (reverse Couchman)

Is it a mere puff?


  • Dimmock v Hallet – “fertile and improvable” – too vague

  • Carlil v Carbolic Smoke Ball – “three times daily for two weeks” & bank deposit – not mere puff

  • Mitchell v Valherie – “immaculate style” was mere puff, “perfect presentation nothing to spend” was not

Elements of Misrepresentation

  1. False Factual Statement


  • Must be able to be presently true or false. Courts fearful of extending liability too far.

  • Conduct

    • Gordon v Selico – Actively did something to cover up dry rot

  • Opinion

    • 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.

    • Matters relevant to a determination of whether a statement of opinion is a misrepresentation:

      • The relative knowledge and position of each parties

      • The actual words used and meaning conveyed

      • Whether fraud is established. Did the person giving the opinion have a genuine belief in his or her opinion no matter how erroneous?

    • 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).

  • Law - Eaglesfield – not actionable unless fraudulent. See also Taylor.

  • Intention

    • Edgington v Fitzmaurice – implied factual statement that you hold the intention.

    • Applied in Ritter.

  • Silence

    • Old rule – not actionable – Keates v Earl of Cadogan – caveat emptor

    • Half-truth

      • 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.

    • Becomes false

      • With v O’Flanagan – Clinic reduced in value between misrepresentation and contract. Duty to make sure statement is correct. See also Jones v Dumbrell.

    • Duty to disclose

      • Fiduciary relationships (McKenzie v McDonald), insurance contracts, sometimes guarantees.
  1. Addressed to misled party


  • Peek v Gurney – Prospectus was addressed to first-time share purchasers, not purchasers of shares from others.

  • 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).
  1. Material


  • Would a reasonable person have been influenced by the statement to enter the contract? (Nicholas v Thompson).

  • Filters out trivial cases; does not apply where statement is fraudulent.
  1. Inducement


  • Misrepresentation does not have to be sole reason, just has to be ‘real’ inducement (materially affected decision) (Edgington)

  • Redgrave v Herd – failure to verify accuracy of representation (even if easy) not a bar to claim.

  • No inducement where:

    • Unaware of misrepresentation

    • 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)

    • 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.

  • Onus of proof

    • On representee (Gould).

    • If statement was by its very nature calculated to induce then there is an evidentiary presumption that you did rely.

    • May not apply outside fraud cases. Strongest in fraud cases (Smith v Kay per Lord Chelmsford LC).

Types of Misrepresentation

Fraudulent


  • Action in deceit; scenarios from Derry v Peek:

    • Making a statement knowing it is false

    • Making a statement without believing it is true

    • Making a statement recklessly/carelessly as to whether it is true/false (higher standard than negligence).

  • Krakowski v Eurolynx Properties – Can be fraudulent without evil motive/malice.

  • 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


  • Hedley Byrne v Heller: A person to whom a negligent statement has been made could recover damages in tort if a special relationship existed.

  • MLC v Evatt – damages available for negligent misrepresentation. Also per Barwick CJ, no need for special skill (rejected PC).

  • 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:

    • 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

    • it would be reasonable for that other person so to rely or act

Innocent


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


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