May 6, 2025
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Misrepresentation in contract law arises when false statements are made before a contract is formed, potentially rendering the contract voidable. A successful claim hinges on specific criteria. The representee (the person to whom the statement was made) holds the right to claim if misrepresentation is proven. Whether the statement was a mere statement or a term of the contract is also a factor to consider (see Term or Mere Representation and Express Terms). Generally, the effect of a misrepresentation makes the contract voidable.
False Statement: The statement must be demonstrably false. It's not enough for a statement to be mostly true; it must be materially false and have induced the representee to enter into the contract. Substantial truth is not enough to avoid misrepresentation; the difference between the statement and the truth must be significant and have influenced the decision-making ( Avon Insurance v Swire Fraser). Furthermore, the statement must be unambiguous; an unreasonable interpretation by the representee does not constitute misrepresentation if the representor did not intend that interpretation (McInerny v Lloyds Bank).
Statement of Fact: The statement must be one of fact, not opinion or future intention. Statements of law can also be considered statements of fact.
Fact vs. Future Intention: A statement of future intention isn't typically misrepresentation because intentions are subject to change. However, if a party can demonstrate that they never intended to fulfill their stated future intention, it can be classified as misrepresentation (Edgington v Fitzmaurice). Wales v Wadham provides a contrasting case where a statement of future intention, made honestly at the time, was not considered misrepresentation.
Fact vs. Opinion: Statements of opinion are generally not statements of fact (Bisset v Wilkinson). The exception occurs when the representor possesses superior knowledge or expertise, placing them in a better position to know the truth than the representee (Smith v Land House Property Corporation; Esso Petroleum v Mardon). In Smith, the court held that a statement about a tenant's "desirability," while usually an opinion, became a statement of fact given the defendant's superior knowledge. Esso Petroleum highlights that expert estimations, if demonstrably false, can also be considered misrepresentation.
Statements of Law: Incorrectly stating the law itself isn't typically misrepresentation. However, misrepresenting the effect of a law constitutes misrepresentation (Pankhania v Hackney LBC).
Words or Conduct: Statements can be made explicitly through words or implicitly through conduct (Spice Girls v Aprilia World Service; Gordon v Selico). The Spice Girls case illustrates misrepresentation by conduct, where their participation in promotional photos, despite knowing a member's impending departure, constituted a false statement. Gordon v Selico highlights the concealment of dry rot as misrepresentation by conduct.
Silence as Misrepresentation: Generally, silence is not a statement, and there's no legal obligation to disclose information (Keates v Earl of Cadogan). However, exceptions exist:
Half-Truths: Statements that are technically true but misleading due to omitted information are misrepresentations (Dimmock v Hallett).
Change of Circumstances: If a previously true statement becomes false due to changed circumstances, there's a duty to correct it (With v OFlanagan).
Contracts uberrimae fidei: Contracts of utmost good faith (e.g., insurance contracts, fiduciary relationships) require full disclosure of material facts (Lambert v Co-operative Insurance Society; Tate v Williamson; Gordon v Gordon).
For a misrepresentation to be actionable, it must have induced the claimant to enter into the contract. This doesn't mean it was the sole reason, only a material one (Edgington v Fitzmaurice).
Materiality: An objective test determines whether a reasonable person would have been influenced by the statement (Smith v Chadwick). If material, inducement is inferred.
Representor's Intent: The representor must have intended the representee to rely on the statement (Peek v Gurney).
Representee's Awareness: The representee must have been aware of the statement (Horsfall v Thomas).
Representee's Reliance: The representee must have relied on the statement, not solely on their own judgment or independent investigation (Attwood v Small; Redgrave v Hurd; Smith v Eric Bush). While reasonableness of reliance isn't strictly required, an unreasonable reliance makes it more difficult to prove inducement (Museprime Properties v Adhill Properties).
If a false statement is corrected in a subsequently signed contract, it is not considered a misrepresentation (Peekay Intermark Ltd v Australia & New Zealand Banking Group).