Misrepresentation

EXAM TECHNIQUE

1) Identify the misrepresentation (false _______ of fact + inducement)

2) Identify the type of __________

3) Explain ________ as the main remedy and apply whether it's available

4) If unavailable, explain how _______ would be awarded

 

1. What is a Misrepresentation?

A misrepresentation is a precontractual 1) False statement of ___ 2) Which induces the misrepresentee to entering the contract

A puff is a vague, exaggerated, or promotional statement made by a seller that is not meant to be taken literally or relied upon as a factual assertion.

 

a. False Statement of Fact

A statement of fact is an ______ verifiable assertion about past or existing circumstance. It cannot be a mere opinion or exaggerated sales talk (puff).

i. Conduct

A misrepresentation can be made through conduct.

A statement of opinion is generally not a statement of fact, unless: • D is in a position of special knowledge or expertise • D knows or should know that the opinion is false

A statement of opinion does not amount to misrepresentation if the person making the statement has no special knowledge or expertise on the matter, and the other party understands it as an opinion rather than a fact.

ii. Silence

Silence generally does not amount to misrepresentation unless 1 of the 3 exceptions apply

1. Half truths - A half-truth or partial disclosure can amount to misrepresentation if it creates a misleading impression

2. Change in circumstances - If a statement of fact is initially correct but becomes false due to a change in circumstances, there is a duty to disclose that change. Failure to do so can amount to a misrepresentation, even if the original statement was true when it was made.

3. Duty to Disclose - Where there is a duty to disclose facts, failure to do so can amount to misrepresentation.

A statement of intention can also be misrepresentation if the person making the statement misrepresents their current state of mind.

 

b. Inducement

The false statement must have induced the claimant to enter into the contract. This means that the claimant must have relied on the misrepresentation when deciding to enter the contract. If the claimant does not rely on the misrepresentation and instead conducts their own independent investigation or relies on advice from a third party, the misrepresentation will not be considered the cause of the contract, and the claim will fail.

A misrepresentation need not be the only factor in inducement; it just needs to be a material one.

A misrepresentation must have played a real and substantial part in the decision of entering a contract.

The misrepresentee has no duty to verify the truth of the misrepresentation.

2. Types of Misrepresentation

a. Fraudulent Misrepresentation

Fraudulent misrepresentation occurs when the misrepresentor knowingly or recklessly makes a false statement to induce the other party into the contract.

The remedies available for fraudulent misrepresentation are: 1. Rescission. 2. Damages: The wronged party can also claim damages under the tort of _____

 

b. Negligent Misrepresentation

Negligent misrepresentation occurs when a party makes a false statement, without deceit, but has failed to exercise _______ care to confirm its veracity.

Misrepresentation is presumed to be negligent unless D can prove: 1. They had reasonable grounds for believing the statement was true, and 2. They genuinely believed the statement to be true. The burden is on the misrepresentor to prove they were not negligent.

Remedies available are: 1. Rescission 2. Damages: The wronged party can also claim damages under the _______________ to compensate for the financial harm caused by the misrepresentation.

 

c. Innocent Misrepresentation

Innocent misrepresentation occurs when a party makes a false statement that is neither ______ nor fraudulent.

The remedies are: 1. Rescission - but this right is not unconditional, because: 2. Damages: The court has the discretion to award damages IN PLACE OF rescission if it is deemed ____

 

REMEDIES

If the misrepresentee wants to affirm the contract, they can: , 1. Expressly inform the misrepresentor 2. _______ affirmation occurs when the misrepresentee acts in a way that shows they wish to proceed with the contract

If the misrepresentee chooses to rescind the contract: , 1. They must _____ tell the misrepresentor that they are ending the contract, or 2. They must act in a way that clearly shows they are refusing to be bound by the contract (e.g., returning goods or refusing to make further payments). 3. The decision to rescind must typically be communicated within a reasonable time after discovering the misrepresentation.

a. Situations where Rescission is Unavailable (TAIL)

1. Third-party rights: If an innocent third party acquires rights under the contract (e.g., buys property), rescission will not be available to undo the contract

2. Affirmation: If the misrepresentee acts in a way that indicates they are continuing with the contract after learning of the misrepresentation, they lose the right to rescind

3. Impossible: Rescission requires returning both parties to their original positions. If this is impossible (e.g., the goods no longer exist), rescission cannot happen

4. Lapse of time: If too much time passes between discovering the misrepresentation and attempting to rescind, the right to rescind may be lost