Solicitor Southampton

What is a misrepresentation?

A misrepresentation is a false statement of fact that induces someone to enter into a contract. There are several types of misrepresentation, including fraudulent, negligent and ‘innocent’ misrepresentation. The concept is deceptively simple.  However, whether a statement is legally seen as a misrepresentation depends on how central the clause is to the contract and whether there were other reasons for being induced into the contact.

The legal requirements for misrepresentation stated simply are:

• There must be a statement.  Lack of disclosure is a separate issue.
• An unambiguous statement
• The statement is actually false
• The statement must appear
• The statement actually misleads the claimant

Fraudulent misrepresentations require evidence of intent on the part of the defendant i.e. a deliberate intention to mislead the other party to the contract.

How are statements of opinion treated by the law?

In must be determined whether the statement was actually an opinion or statement of fact.  In Bisset v Wilkinson, a farmer represented that his land could hold 2000 sheep.  It, in fact, could not. This case held that where both parties know the facts, then any statement made based on those facts is likely to be an opinion.  If, however, the defendant makes a statement based on some fact unknown to the other party, or the claimant lacks the capacity to learn it is likely that the statement will be treated as a misrepresentation subject to the requirements of misrepresentations stated above.

Under the law, opinions are not treated as misrepresentations.

How are statements of intention treated by the law?

Statements of intention are generally treated in the same way as statements of fact and can therefore be treated as misrepresentations.  However, to be actionable, it must be a statement of present intention rather than future intention.

In Edgington v Fitzmaurice, the claimant was a shareholder and the defendants were officers.   The company directors advertised shares and it was state that the shares would be used to renovate the property and improve the business.  The claimant asked if he would be entitled to have a first charge on the property in the event of the company going bankrupt and was told he would.  The court found that the shares were actually being used to pay off the company’s debts.  This was seen to be a misrepresentation of present intention the claimants succeeded in their claim.

What are the remedies for misrepresentation?

If the court finds in favour of the claimant, they will be entitled to rescind the contract and claim damages.  Rescinding the contract (‘rescission’) sets aside the contract so that any past and future obligations are legally invalid.  The general aim of civil remedies in English law is to put any person who suffers loss in the same position as they were prior to a breach of the law.  However, rescission is often not enough to achieve this.  Damages can be claimed for both fraudulent and negligent misrepresentation, although it is arguable that any loss suffered is going to be greater in cases of fraudulent misrepresentation.