When is misrepresentation actionable

False statements of fact that induce a contract are known as actionable misrepresentations. In case of a misrepresentation, there are different legal remedies for breaches of contract. A misrepresentation renders the contract voidable liable to be set aside using the remedy of rescission so that the contract will be treated as if it had never been made, whereas a breach of contract will have no effect on the existence of the contract in the absence of a repudiatory breach that will terminate the contract when future contractual obligations will be discharged.

The chapter identifies actionable misrepresentations and, in particular, loss in instances where there is a duty of disclosure in English law.

There are three types of actionable misrepresentations, dependent upon the state of mind of the one who makes the false statement: fraudulent, negligent, and innocent. This chapter looks at the legal remedies for actionable misrepresentations such as rescission, the availability of damages for different types of misrepresentations and the provisions of the Misrepresentation Act It also examines the effect of the Consumer Protection from Unfair Trading Regulations CPRs as amended on this area of law, the criminal offences and civil remedies for consumers, as well as the relationship of misrepresentation to other areas of law.

Finally, it looks at clauses that seek to exclude or limit liability for misrepresentation or to deny any actionable misrepresentation, e. You do not currently have access to this chapter. Please sign in to access the full content.

Printed from Oxford Law Trove. Under the terms of the licence agreement, an individual user may print out a single article for personal use for details see Privacy Policy and Legal Notice. About Subscribe Customer Services. Law Trove. Advanced search. Your current browser may not support copying via this button. Sign In Contents.

Remedies: recent case-law has shown that the remedies available are as those available in fraud unless the representor discharges the burden of proof. In particular, damages will be based in the tort of deceit rather than the tort of negligence. Once an actionable misrepresentation has been established, it is then necessary to consider the remedies available to the misrepresentee.

Rescission, ie setting aside the contract, is possible in all cases of misrepresentation. The aim of rescission is to put the parties back in their original position, as though the contract had not been made.

The injured party may rescind the contract by giving notice to the representor. However, this is not always necessary as any act indicating repudiation, eg notifying the authorities, may suffice. Rescission is an equitable remedy and is awarded at the discretion of the court.

The injured party may lose the right to rescind in the following four circumstances:. The injured party will affirm the contract if, with full knowledge of the misrepresentation and of their right to rescind, they expressly state that they intend to continue with the contract, or if they do an act from which the intention may be implied. Note that in Peyman v Lanjani [] Ch , the Court of Appeal held that the plaintiff had not lost his right to rescind because, knowing of the facts which afforded this right, he proceeded with the contract, unless he also knew of the right to rescind.

The plaintiff here did not know he had such right. As he did not know he had such right, he could not be said to have elected to affirm the contract. If the injured party does not take action to rescind within a reasonable time, the right will be lost. Where the misrepresentation is fraudulent, time runs from the time when the fraud was, or with reasonable diligence could have been discovered.

In the case of non-fraudulent misrepresentation, time runs from the date of the contract, not the date of discovery of the misrepresentation. The injured party will lose the right to rescind if substantial restoration is impossible, ie if the parties cannot be restored to their original position.

Precise restoration is not required and the remedy is still available if substantial restoration is possible. Thus, deterioration in the value or condition of property is not a bar to rescission. If a third party acquires rights in property, in good faith and for value, the misrepresentee will lose their right to rescind.

Thus, if A obtains goods from B by misrepresentation and sells them to C, who takes in good faith, B cannot later rescind when he discovers the misrepresentation in order to recover the goods from C.

The right to rescind the contract will also be lost if the court exercises its discretion to award damages in lieu of rescission under s2 2 of the Misrepresentation Act For innocent misrepresentation two previous bars to rescission were removed by s1 of the Misrepresentation Act the misrepresentee can rescind despite the misrepresentation becoming a term of the contract s1 a , and the misrepresentee can rescind even if the contract has been executed s1 b.

Generally, this will be relevant to contracts for the sale of land and to tenancies. An order of rescission may be accompanied by the court ordering an indemnity. This is a money payment by the misrepresentor in respect of expenses necessarily created in complying with the terms of the contract and is different from damages.

The injured party may claim damages for fraudulent misrepresentation in the tort of deceit. The purpose of damages is to restore the victim to the position he occupied before the representation had been made.

The test of remoteness in deceit is that the injured party may recover for all the direct loss incurred as a result of the fraudulent misrepresentation, regardless of foreseeability. Any term of a contract which excludes liability for misrepresentation or restricts the remedy available is subject to the test of reasonableness.

Clicking the Accept All button means you are accepting analytics and third-party cookies check the full list. Fraudulent misrepresentation: where a false representation has been made knowingly, or without belief in its truth, or recklessly as to its truth. Negligent misrepresentation: a representation made carelessly and in breach of duty owed by Party A to Party B to take reasonable care that the representation is accurate.

If no "special relationship" exists, there may be a misrepresentation under section 2 1 of the Misrepresentation Act where a statement is made carelessly or without reasonable grounds for believing its truth. Innocent misrepresentation: a representation that is neither fraudulent nor negligent. For fraudulent and negligent misrepresentation, the claimant may claim rescission and damages.