Part I - The Foundations of Misrepresentation
Misrepresentation is generally understood to be a false statement of fact made by one party to another. It is most relevant in the context of contract law whereby one party attempts to induce another into a contract on the basis of words or conduct that amount to false statement. Where a claimant proves misrepresentation the remedies available may include rescission or damages.
Introduction
The concept of misrepresentation arose in early case law and later became enshrined in statute with the Misrepresentation Act 1967. To fully understand how it operates in the modern context it is useful to consider both its establishment as a principle and the requirements that have arisen for bringing a claim.
Misrepresentation at Common Law
The early case of Hedley Byrne v Heller [1964] dealt with the concept of misrepresentation and its basis for founding an action in tort. Prior to Hedley, the claimant had to show proof of a special relationship existing between the parties that gave rise to a duty of care.
Although the Hedley claim failed, the case established the principle that no special relationship was required for a duty of care to exist. Furthermore, in an action for negligent misrepresentation it was enough that the information was incorrect and that it was foreseeable it would be relied upon.
Misrepresentation Act 1967
The Misrepresentation Act 1967 codified the principles of misrepresentation and formally set out the remedies available. This had particular relevance to the division between negligent misrepresentation and fraudulent misrepresentation.
Where a party has been induced into a contract by a misrepresentation; he may be able to rescind the contract, claim damages or both. Actions for misrepresentation generally allege negligent misrepresentation or fraudulent misrepresentation but following the 1967 Act, the latter became less common due to the proof requirements. Specifically, the burden of proof passes from the claimant to the defendant in fraud cases and proving lack of honest belief in a representation can be particularly difficult. The damages for both are the same:
Section 2
"(1) Where a person has entered into a contract after a misrepresentation has been made to him by another party thereto and as a result thereof he has suffered loss, then, if the person making the misrepresentation would be liable to damages in respect thereof had the misrepresentation been made fraudulently, that person shall be so liable notwithstanding that the misrepresentation was not made fraudulently, unless he proves that he had reasonable ground to believe and did believe up to the time the contract was made the facts represented were true."
If you need advice in respect of claims for misrepresentation or other contractual issues, Rollingsons has experienced lawyers who can assist you; for more information please contact James Crighton on 0207 611 4848.
