INTRODUCTION Whenever a contract goes badly for one party, the possibility of a vitiating misrepresentation claim arises as a possible

ground for legal action by that party to void the contract or claim damages. There is a large body of law on the topic of misrepresentation, but it is complex and often difficult to reconcile. This paper considers some of the unsettled issues and offers suggestions for resolution. In order to keep the topic manageable (whole books have been written upon it), we will focus on issues relating to remedies for misrepresentation in a contractual context. In particular, we will consider the challenges inherent in selecting the appropriate remedy as highlighted by the oft cited authorities and recent case law, and suggest a framework for analysis. The various theories of remedies for contractual misrepresentation - rescission, damages and restitution - will then be considered in light of the framework, along with the concept of an ancillary constructive trust. Finally, a number of theses are presented to assist in developing a consistent and reasoned approach to remedies for misrepresentation. It is useful, however, to begin with a brief discussion of the criteria for discerning the kind of operative misrepresentation for which a remedy can be obtained.

Misrepresentation:
A misrepresentation is a false statement which persuades someone to enter into a contract. The contract is then void able. Misrepresentation has 3 parts A statement. The statement is about a fact which can be checked. The statement causes the party to enter into the contract.

Statement:
A statement may be verbal or written. A statement which is half true can be misleading. For example, if you say that your farm is rented to tenant for 290 per year, but you dont mention that the tenant has actually not paid the rent for several months and has left the farm, and you cannot find a new tenant. If the statement is true when you made it, but things change and it is no longer true before the contract is made, then you must tell the other party.

A fact:
The representation must be a statement about a specific, existing fact or event which can be checked Therefore, the following things are not statements of fact Advertising hype Statements of law

 Statements of opinion Statements of intention

Advertising Hype:
Statements such as this is the best toothpaste in the world or this is the finest sofa on the market are not representations They are simply statements made to try to interest the buyer However, if the salesperson said something like this car uses the same engine as a BMW then this may be a misrepresentation if it is not true This is closer to a statement of fact

Statements of Law:
Ignorance of the law is no excuse Everyone is assumed to know the law One party to the contract cannot claim that he was mislead about some part of the law affecting the contract by the other party If he was unsure, he should have checked with a lawyer

Statements of Opinion:
Statements of opinion are not statements of fact However, there would be a misrepresentation if what you said was not really your opinion at all But proving this could be difficult

Statements of Intention:
Statements of intention are not misrepresentations even if the intention later changes However, in a similar way to statements of opinion, if the statement you made was never your intention then there could be a misrepresentation But proving this could be difficult

Statement induces the contract:

The statement of fact must cause the other party to enter into the contract This means that: 1. The statement must have been made by one party to the contract to the other party, and not by someone else 2. The other party must know about the statement and rely on it So, if the party orders a report from an expert to check the fact, he will then be relying on the report and not on the statement.

Types of Misrepresentation:
There are 3 types of misrepresentation Fraudulent misrepresentation Negligent misrepresentation Innocent misrepresentation The difference is important because each type has its own remedy

Fraudulent Misrepresentation
In this case, a person deliberately makes a false statement They know what they are saying is not true, or they dont care if it is true or not In other words, there is some dishonesty in their action The problem in this situation can be proving that the person deliberately made a false statement

Negligent Misrepresentation

At common law, a negligent misrepresentation is where you make a statement which is false but which you believed to be true For example, a company stated in an advert that they were authorised by the local government They had applied for authorisation and believed it would be granted However, they did not get the authority The statement was not fraudulent because the company had a genuine belief that they would get the authority

Innocent Misrepresentation
An innocent misrepresentation is one which the person making it not only believes to be true, but has good reasons for believing that This could be because the seller had been persuaded to make a contract by the same misrepresentation For example, Bill makes a contract with John to buy Johns car John tells Bill that new tyres were put on the car after it had travelled 26,000 km In fact, that is not true However, John thinks it is because when he bought the car from Bob that is what Bob told him.

Analysis:
Factors that vitiate the contract because of misrepresentation:
Misrepresentation occurs where a party is induced into entering into a A statement of opinion will not constitute a misrepresentation unless the contract by anothers false statement of fact or law. representor does not honestly believe the opinion tht he states, or the representor

represents an opinion for which he does not have reasonable grounds and impliedly represents that he has such grounds. A statement of intention will not constitute a misrepresentation unless the representor, at the time that the statement was made, does not believe that the intended state of affairs will occur. false. Negligent misrepresentation exists at both common law and in statute. An innocent misrepresentation is one that is completely devoid of fraud or Subject to several exceptions, silence cannot constitute misrepresentation. A fraudulent misrepresentation occurs where a party makes a false statement

knowingly, without belief in its truth, or recklessly careless of whether it is true or

negligence. Damages are not available as of right where the misrepresentation is innocent. Misrepresentation renders a contract void able, but in certain circumstances, In cases of negligent and innocent misrepresentation, the court can award the representee will be barred from rescinding the contract. damages in lieu (instead) of rescission.

Remedies for Misrepresentation

As we mentioned earlier, the remedies available for misrepresentation depend on the type of misrepresentation.

Fraudulent Misrepresentation
The remedies here are recission and/or damages Recission means that the court tries to put the parties back in the position which they were in before the contract was made However, this is not always possible

 Eg: the goods sold have been eaten Damages is payment of money which covers all the losses which the person makes as a direct result of entering into the contract The remedies here are also recission and/or damages

Innocent Misrepresentation
At common law, the remedy is recission Under the Misrepresentation Act 1967, the court can award damages instead of recission if it thinks that is fair

Actionable Misrepresentation- False Statement of Fact

1. Statements Misrepresentation can be constituted by a written or verbal statement. It can also consist in the non-disclosure of salient information. A duty to disclose arises only in certain contexts: a. Half-truths Where the statement is, without further disclosure, misleading

b. Falsification Where the statement has become false since being made Where the parties are in an fiduciary relationship (Insurer/insured, lawyer/client etc) 2. Facts The law draws a distinction between facts, opinion and predictions: Fact:[profitability of resort](Gould) or very large sum of money (Nicholus) Opinion: [this is a very good car] Prediction: I think that this land will be sewered in four months time (Ritter) A statement containing evaluative or qualitative terms will not necessarily be an expression of opinion (Nicholus). Nicholas Vs Thompson (1924) VR: Facts: The contract was for the sale of rights to a film process and a syndicate. The buyer Nrelied upon statements made by the seller T that he had been offered a very large sum of money for the rights Issue: Was the representation one as to fact or merely an opinion? The presence of evaluative or qualitative terms (very large) do not render any statement one of opinion Decision: Here, the statement was not merely an expression of an opinion, but was, in fact, a statement of fact. Reasoning: c. Fiduciary relationship:

As such, it is capable of constituting a misrepresentation

Even where a misrepresentation does contain an element of opinion, it may still constitute a statement of fact where it is sufficiently factual (Gould). Ritter Vs North side Enterprises (1975) HCA: Facts: North Side, the seller of property, made a statement of Ritter, the buyer, that I think that this land will be sewered within 4 months time R relied on this statement in entering into the contract; upon discovering that the property had not yet been sewered, he sought recession of the contract of sale Issue: Was the representation one of fact or opinion? Reasoning: A statement of belief in the future connection of sewerage pipes to a property within 4 months is only a prediction, despite the buyers assertion that the seller didnt believe that statement. o This would be a representation as to a future state of

affairs However, the fact misrepresented was the state of mind of the representor.