Misrepresentation

Overview

A contract may be negated by the misrepresentation of one party. A misrepresentation is a statement which is untrue, which induces a party to enter a contract. Errors and in some circumstances, omissions, may amount to a misrepresentation. A representation may arise by conduct.

A representation may become part of the contract.  The breach may be either a breach of condition entitling the other party to terminate or a breach of warranty entitling the other party to damages only.

Many representations do not become part of the contract. They may be an inducement, reason or motive why the contract is entered.  If the representation is false, legal consequences will follow. The rights of the innocent party depend on whether the representation is dishonest, careless or innocent.


Criminal Misstatements

Certain misrepresentations constitute criminal offences under consumer protection legislation and in some cases, under the ordinary criminal law. False and deliberately misleading statements made with the intent to gain or cause loss constitute a serious breach of criminal law.  They will usually amount to criminal fraud.

The person who makes the statement may also be guilty of an offence under consumer protection laws where the statement is made, in circumstances where it is false, regardless of intent.

A trader who engages in an unfair commercial practice is guilty of an offence. A commercial practice is unfair if it is contrary to one or both of the following

  • the general principle of good faith in the trader’s field of activity;
  • the standard of skill and care that the trader may reasonably be expected to exercise in respect of consumers,

and would be likely to cause appreciable impairment of the average consumer’s ability to make an informed choice in relation to the product concerned, and cause the average consumer to make a transactional decision that he would not otherwise make.

A commercial practice is misleading if it would be likely to cause the average consumer to be deceived or misled in relation to any matter in relation to the trader or the goods. See the section on un unlawful commercial practices.


Statements of Fact

A misrepresentation must relate to a present or past fact.  An opinion of itself may not be a fact. However, an opinion may impliedly assert the truth of other underlying facts.

Traditionally, statements in relation to the law did not have the same legal consequences as a statement of fact.  This rule has been gradually modified and limited by the courts.

A statement of intention will not usually be a misrepresentation. However, if the intention is not in fact present, it may be a misrepresentation.

Statements of opinion are not statements of fact in themselves. A statement of opinion may imply that the maker has exercised skill and care in relation to the underlying facts and that he gives an opinion based on those facts.  If it is reasonable for the other party to rely on the statement, then it may be operative and have legal effect.


Praise/ Puffing/ Advertisements

A statement of opinion, “hyping” or “puffing” the goods, will not be generally sufficiently certain for the purpose of misrepresentation. In some cases, a statement may be so outrageous that it is incapable of being believed and relied upon.

There must be an express or implied statement or assertion of fact. So-called puffing or eulogistic praise will not generally constitute a representation because it does not usually make or assert a statement of fact.

A statement of opinion may go beyond being colourful to making an implied assertion of fact. Where the opinion is not justified by the facts there may be a misrepresentation. There may be a thin line between these cases.

In most cases, it is difficult to sustain a claim of misrepresentation on the basis of a statement in an advertisement that a particular product is as good as or better than another product.  Statements in advertisements are capable in principle of being representations.In order to be legally operative, they must not be a mere embellishment. If there is a precise statement of the product’s particular qualities which are factually incorrect, there may be a legally operative misrepresentation.


One Party to Another

The misstatement must be made on behalf of one party to the contract to the other. The misrepresentation must have been made to the innocent party. It must be untrue.  It does not necessarily have to have been known to be untrue. However, the effect of the misrepresentation varies according to whether it is fraudulent, negligent or innocent (not careless).

As is the case generally, an agent or representative may bind another person his principal, to the consequences of misrepresentations made by him. The misrepresentation must have been made by or on behalf of the other party.  It may be made by him personally or somebody on his behalf. If it is made by a stranger.  It is not effective if it is outside the scope of the maker’s authority.

Under the Consumer Credit Act, a dealer who makes misrepresentations is regarded as doing so on behalf of the finance company so that it is jointly and severally liable for breach of agreement or misrepresentation.

A misrepresentation is true as long as it is substantially true. If it is untrue in some technical or non-material respect, this is not operative. / This issue is its effect on the innocent party.


Reliance on Misrepresentation

It must be shown the misrepresentation resulted in the innocent party entering the contract. If a buyer becomes aware of the falsity of a statement before entering a contract, then he cannot be said to rely on it in entering the contract.

The reliance must be material, but need not be the only or even the dominant reason the contract was entered. it must be one of the underlying reasons or causes. If the party would have entered the contract, in any event, there is no reliance.

The misrepresentation must be one which would induce a reasonable person to enter the contract. It will be presumed that where a person makes a material representation in order to induce the other to rely on, it that the other has so relied on it

If a misrepresentation does not come to a person’s attention, he cannot have relied on it. Even if it does come to his attention it is not legally operative if he did not, in fact, rely on it and it did not affect his judgement.

In order to invalidate a contract, it must be shown that it was entered in reliance on the statement.

If a party becomes aware that the misrepresentation is untrue before entering the contract then by definition, he cannot claim to have relied on it. It may be clear, for example in some situations, that a person will rely on his own skill rather than the representation.


Exclusion of Liability I

Sometimes exclusion clauses are inserted in contracts, which provide that a purchase, cannot rely on statements.  A party may purport to disclaim liability for representations and place an obligation on the other party to verify them.  This will not exclude liability for fraudulent (deliberate) misrepresentation. It may avoid liability for innocent or negligent misrepresentation.

In the case of a sale of goods and supply of services any clause which provides for the exclusion of liability for negligent fraudulent and innocent misrepresentation must be fair and reasonable. This provision applies to contracts of the sale of goods, services, letting or hire purchase of goods.  It does not apply to contracts for the sale and purchase of land.


Exclusion of Liability II

What is fair and reasonable the circumstances is judged in accordance with criteria set out in the Sale of Goods Act.  The legislation sets out criteria for clauses which are potentially fair and reasonable. They include

  • the relative strength of the bargaining position
  • whether the customer was given an inducement to buy
  • whether the buyer was given the opportunity to enter a contract with another without such a clause
  • whether he knew or ought to have known of the existence of the term having regard to his course of dealings
  • whether the term excludes restricts liability if some conditions are not complied with,
  • whether it was reasonable at the time of the contract to expect that compliance with that condition would be practicable
  • whether the goods are manufactured processed adapted to the special order of the buyer.

 

Apart from the above Act, an agreement may exclude or limit liability for misrepresentation other than for fraudulent misrepresentation. The exclusion may be an unfair contract term and be thereby void in a consumer contract.


References and Sources

Irish Textbooks and Casebooks

Clark, R. Contract Law in Ireland 8th Ed. (2016) Ch. 11, 13

Friel, R. The Law of Contract 2nd Ed, (2000)

McDermott, P.  Contract Law (2001) 2nd Ed (2017) Ch. `13

Enright, M. Principles of Irish Contract Law (2007)

Clark and Clarke Contract Cases and Materials 4th Ed (2008)

English Textbooks and Casebooks

Poole, J. Casebook on contract law. (2014) 12th edition

Stone and Devenney, The Modern Law of Contract 10th Ed (2015)

McKendrick, Contract Law 10th Ed (2013)

Chen-Wishart, Contract Law 5th Ed (2015)

Anson, Reynell, Beatson, J., Burrows, Cartwright, Anson’s law of contract. 29th Ed (2010)

Atiyah and Smith, Atiyah’s introduction to the law of contract. 6th Ed.

Chen-Wishart, M. (2015) Contract law. 5th Ed.

Cheshire, Fifoot and Furmstons, Furmstons and Fifoot Cheshire, Fifoot and Furmston’s law of contract. OUP.

Duxbury, Robert (2011) Contract law. 2nd Ed.

Halson, Roger (2012) Contract law. 2nd Ed.

Koffman & Macdonald’s Law of Contract. 8th Ed. (2014)

O’Sullivan, Hilliard, The law of contract. 6th Ed. (2014)

Peel, and Treitel, The law of contract. 13th Ed. (2011).

Poole, J.Casebook on contract law. 12th Ed. (2014).

Poole, J.  Textbook on contract law. 12th Ed. (2014)

Richards, P Law of contract. 10th Ed. (2011)

Stone, R.  The Modern law of Contract. 10th Ed. (2013)

Treitel, G. H.  An outline of the law of contract. 6th Ed (2014).

Turner, C Unlocking contract law. 4th Ed. (2014).

Upex, R. V., Bennett, G Chuah, J, Davies, F. R. Davies on contract. 10th Ed. (2008).

UK Casebooks

Stone,Devenney, Text, Cases and Materials on Contract Law 3rd Ed (2014)

McKendrick, Contract Law Text, Cases and Materials 6th Ed (2014)

Stone, R, Devenney, J Cunnington, R Text, cases and materials on contract law. 3rd Ed (2014)

Burrows, A. S.  A Casebook on Contract. 4th Ed.

Beale, H. G., Bishop, W. D. and Furmston, M. P. Contract: cases and materials. 5th ed. (2008)

Blackstone’s Statutes on Contract, Tort & Restitution 2017 (Blackstone’s Statute Series)

UK Practitioners Texts

Chitty on Contracts 32nd Edition, 2 Volumes & Supplement (2016)

The above are not necessarily the latest edition.