By the legal definition, misrepresentation refers to an untrue statement of fact made by one party, and which is not only relied upon by the aggrieved party but also induces him to enter the contract, causing him to suffer loss. A closer look at the sentence above explains clearly that the statement made must be of fact and not law. A statement of opinion is not actionable unless it is proved that the opinion was never really held.
Sometimes a misrepresentation can be considered fraudulent (or deliberately dishonest) and can come under the definition of fraud (as ruled under Derry v Peek [1889],14 Apps Cas 337). It may also be considered negligent (but not within the tortious meaning of the word), or innocent.
Fraudulent misrepresentation
When a claim for fraudulent misrepresentation is made, the burden of proving that fraud has taken place lies on the claimant. Thus, unless there is crystal clear evidence of the fraud, parties do not make such a claim; instead, a claim for misrepresentation through negligence is made. But when it is proved that the misrepresentation has been made fraudulently, the aggrieved party has the right to claim damages in tort, besides rescinding the contract and claiming damages.
Claims under Misrepresentation Act of 1967
The aggrieved party must first prove that there exists an actionable misrepresentation, after which the onus to disprove negligence shifts to the defendant. Thus, it lies upon the defendant to prove that there existed sufficient reasons for him to believe that the statements he made were true at the time of making the contract. When this is proved, the misrepresentation is considered negligence. The remedies for such a misrepresentation include rescission and damages. When the defendant successfully establishes his defence, damages are not available, although rescission is.
Rescission
The award of rescission is discretionary and hence subject to the equitable bars; if none of them apply, but still the court decides not to grant rescission, it may award damages in lieu of the claim for rescission. Usually, rescission is awarded only when the misrepresentation results in the aggrieved party losing their power to bargain. This was held as a decision in the case of Gosling v Anderson [1972] The Times, 6th February, cf Museprime Properties v Adhill properties Ltd. [1990] 36 EG 114. Although it is possible to rescind the contract after completion, it is subject to equitable rules and may not be possible when a third person has acquired an interest in the land.
Damages
Under the Misrepresentation Act of 1967, it is possible for a claimant to be awarded damages on a tortious basis. When this is done, he is awarded both in lieu of rescission and as compensation for the loss suffered. However, the basic principle here is that he cannot be awarded for more than he has suffered. Thus, he cannot claim for more than he has suffered.
Limitation period
A misrepresentation claim does not arise out of the contract or tort; thus limitation period as prescribed under the Limitation Act does not apply here. A claim for misrepresentation only relies on the doctrine of lapse of time.
Incorporation as a term of the contract
As earlier mentioned, it is possible for parties to include misrepresentation in the contract. When this is done, the aggrieved party can claim damages under s1 of the Misrepresentation Act of 1967. This gives the claimant the right to seek rescission of the contract as well as remedy for damages. But, if the breach is only regarding a minor contractual term, only damages can be claimed.
Imputed knowledge
Information acquired by the conveyancing solicitor in the course of that transaction is considered to be known to his client, irrespective of the fact that it is known or not. When a solicitor gives incorrect reply to enquiries during the pre-contract stage, his knowledge and misstatement is attributable to the client thereby making him liable for misrepresentation. However, this also allows the defendant party to make a claim against his conveyancing solicitor and hold him liable for negligence. Similarly, when an incorrect claim is made by the seller to the buyer, but the same is later rectified through correspondence between solicitors of both parties, the buyer cannot claim at a later stage that he did not have knowledge of this (even if it is not revealed to him by his solicitor). He is deemed to know of this correction, thereby disallowing him from making a claim for misrepresentation. This was the gist of a decision held in the case of Strover v Harrington [1988] Ch 390.
Exclusion clauses
A clause laid down in the contract that aims to exclude liability for misrepresentation is valid only to the extent that it satisfies the reasonableness test as specified under S11 and Sch2 of the Unfair Contract Terms Act 1977. This reasonableness test is to be applied subjectively and under the light of circumstances known to the parties when the contract was made. Thus, there is no guarantee that a particular form of wording would satisfy this test.
But the use of SC 7.1 and SCPC 9.1 aims to limit the seller’s liability in the case of misrepresentation. Thus, damages are payable for misrepresentation only when there is actual difference between what was represented and what actually exists. In the case of rescission, it is usually available only where there was fraud or rash negligence, or when the aggrieved party has been forced to accept, that is substantially different in terms of quality, quantity, or tenure from what they have been led to believe.
Sometimes, standard forms of pre-contract enquiries have an exclusion clause printed on them. However, this is not the case when Protocol transactions are used. The exclusion clause is also subject to a reasonableness test (as laid under S11 and Sch2 of the Unfair Contract Terms Act of 1977). This was held in the case of Walker v Boyle [1982] 1 All ER 634 where an exclusion clause in the pre-contract enquiry form failed to clear the reasonableness test.
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