MISREPRESENTATION

 MISREPRESENTATION

l Definition

-A misrepresentation is a false statement of fact made by one party to another, which, whilst not being a term of the contract, induces the other party to enter the contract.

-Section 18 CA 1950

 

l Conditions to be fulfilled before misrepresentation can be actionable.

-Statements of opinion which is a false statement of opinion is not a misrepresentation of fact. Refer to the case of Bisset v Wilkinson where the Privy Council make a judgement that the statement was merely of an opinion which the appellant honestly held.

-Statements as to the future which means a false statement by a person as to what he will do in the future is not a misrepresentation and will not be binding on a person unless the statement is incorporated into a contract. In Edgington v Fitzmaurice, the Court held that the statement of intention was a statement of fact and amounted to a misrepresentation and that the plaintiff was entitled to rescind the contract.

-Statements of the law that described a false statement as to the law is not actionable misrepresentation because everyone is presumed to know the law.  

 

l Exceptions under English Law

-Half truths which means the representor must not misleadingly tell only part of the truth.

-Statements which become false where a statement was true when made out but due to a change of circumstances has become false by the time it is acted upon, there is a duty to disclose the truth. This issue was related to the case of With v O'Flanagan.

-Contracts uberrimae fidei which is impose a duty of disclosure of all material facts because one party is in a strong position to know the truth such as contract of insurance.

-Fiduciary relationship where there is a fiduciary relationship between the parties to a contract, a duty of disclosure will arise, eg, solicitor and client, bank manager and client, trustee and beneficiary, and inter-family agreements.

 

l Second condition : inducement

-Materiality which means the misrepresentation must be material, in the sense that it would have induced a reasonable person to enter into the contract.

-Reliance where the representee must have relied on the misrepresentation also there will be no reliance if the misrepresentee was unaware of the misrepresentation which can be refer to the case of Horsfall v Thomas.

 

l Types of misrepresentation under English Law

-Fraudulent misrepresentation was defined by Lord Herschell in Derry v Peek as a false statement that is made with knowingly, or without belief in its truth, or recklessly, careless as to whether it be true or false.

-Negligent misrepresentation where there is a false statement made by a person who had no reasonable grounds for believing it to be true. For instance, in the case of Hedley Byrne v Heller.

-Wholly innocent misrepresentation which is a false statement which the person makes honestly believing it to be true. The usual remedy is rescission with an indemnity. For instance, in the case of Sim Thong Realty Sdn Bhd v Teh Kim Dar

 

l Effect of misrepresentation

-In Section 19 (1) of CA, the effect of an actionable misrepresentation is to make the contract voidable, giving the innocent party the right to rescind the contract and/or claim damages.

 

l Remedies for misrepresentation

-The rescission which is setting aside the contract, is possible in all cases of misrepresentation.

-There are three limitation of recission which is firstly the affirmation of the contract. Secondly, the restitution in integrum and lastly is the third party acquires rights or bona fide purchaser for value without notice.

 

l Damages

-The injured party may claim damages for fraudulent misrepresentation in the tort of deceit. Damages are available in addition to rescission because an action for fraud is grounded upon the tort of deceit.

-The purpose of damages is to restore the victim to the position he occupied before the representation had been made.

-Case of Abdul Razak bin Datuk Abu Samah v Shah Alam Properties Sdn Bhd. The court held that in the case of fraud the misled party is entitled under Section 19(1) of the Act to a decree of rescission and also to an award of damages.