SQE2 Misrepresentation

Question 1

What to consider in misrepresentation question?

Answer 1

1. Did buyer make false statement of fact or law
   - can be words, conduct or silence
2. Did this induce party into entering contract
   - must be significant but not only reason
3. Was misrep. fraudulent, negligent or innocent
4. Has right to rescission been lost
   - affirm
   - delay
   - impossibility of restitution
   - 3rd party has acquired right
5. Are damages available
   - not for innocent (unless in lieu)
6. Is there exclusion clause
   - subject to UCTA 1977
   - not if fraudulent

Question 2

Does a misrepresentation have to be said or in writing? (what actions can constitute misrepresentation)

Answer 2

Conduct
- vendor covering up defect in product

Silence only if:
- Fiduciary relationship
- Relationship of trust and confidence (partnership)
- Contracts of utmost good faith
- Partial non-disclosure/ half truth if misleading
- failure to correct representation where situation changes before contract is entered into

Question 3

Can a statement of opinion be a misrepresentation?

Answer 3

Not if it is honestly, genuinely and reasonably held.

Question 4

Can a statement of intention be a misrepresentation?

Answer 4

Will be misrepresentation if at the time they knew that it was false

Question 5

Can a promise or statement about a future event be a misrepresentation?

Answer 5

No because they cannot be a statement of fact.

Promise may however be a term.

Question 6

What are the different types of misrepresentations?

Answer 6

1. Fraudulent
   - statement was made knowingly, recklessly and with our belief in truth :
2. Negligent
   - Actionable unless the person who made it can prove that they had reasonable grounds for believing, and did believe, that the facts were true
3. Innocent
   - Misrepresentation that is not made fraudulently or negligently
   - Maker of statement had reasonable grounds for believing that it was true

Question 7

When might rescission not be available?

Answer 7

1. Affirmation
   - If whilst having full knowledge of misrepresentation
   - Can be by statement or by conduct (such as continuing performance)
2. Lapse
   - Must rescind in reasonable time
3. Impossibility of restitution
   - Goods in question have declined in value
   - Nature of subject matter had changed substantially
4. 3rd Party Rights
   - If bona fide 3rd party has acquired any rights under contract (good title)

Question 8

When does time for lapse of rescission start running for misrepresentation?

Answer 8

Non-fraudulent
- time starts when they discover, or should have discovered misrepresentation

Fraudulent
- when fraud is discovered

Question 9

When are damages in Lieu of Rescission available?

Answer 9

Available at discretion of court for:
- Innocent and negligent misrep
- Not available if right to rescind has been lost

In practice used when misrep is so small that it would be inequitable to deprive other party of benefit of contract

Question 10

What is included in damages for misrepresentation?

Answer 10

Damages to recover losses incurred as a result of entering into the contract and any incidental expenditure

Minus
- benefit innocent party received
- failure to mitigate losses