Q.
a) Explain what is the definition of misrepresentation. (5 marks)
b) Sofia bought a home from the Putri Developer Company. When the house is ready, Sofia sells the house to Danial. Danial read the brochure issued by the Putri Developer Company, which stated that the ownership of the house is Freehold. Sofia did not make any statement regarding the ownership status of the house. After buying the house, Danial found that the ownership of the house was a leasehold status. Danial cannot claim that Sofia did misrepresentation because the statement did not come from Sofia.
Based on the above situation, please state the criteria of misrepresentation. (15 marks)
(20 marks, 2018 Q8)
A.
Repeat of this question in
Further reading on Misrepresentation here.
2019 answer in relation to s.14, s.18 and s.19 of the Contracts Act 1950. Below answer is more of referencing to external source.
a) Definition of misrepresentation
: an intentionally or sometimes negligently false representation made verbally, by conduct, or sometimes by nondisclosure or concealment and often for the purpose of deceiving, defrauding, or causing another to rely on it detrimentally; also : an act or instance of making such a representation
Ref:
https://www.merriam-webster.com/legal/misrepresentation
An assertion or manifestation by words or conduct that is not in accord with the facts.
https://legal-dictionary.thefreedictionary.com/misrepresentation
An example of misrepresentation:
Assuming that a real estate agent owns a plot of swampland but advertises it as valuable commercially (mixed) zone land. This is a misrepresentation. If a prospect buyer bought it relying on the estate agent's statement that it is a mixed zone land and thus valuable, the buyer may sue the estate agent for monetary losses resulting from the purchase. The contract of sale and purchase can be voidable due to this misrepresentation.
b) Criteria of misrepresentation
Because Sofia sold to Danial, and not developer selling to Danial. Freehold or leasehold was the contention of the argument.
Sofia did NOT mislead Danial as she did NOT say the house she was selling is a freehold title. It was Danial who assumed freehold status from a third party source - brochure of Puteri Developer Company.
Sofia did NOT induce Danial to purchase using its status of "freehold". There was no inducement. On this part, it can be seen that Sofia was "silent" on the freehold status as she said nothing about status of title. In fact, silence cannot constitute misrepresentation.
The misleading information (freehold which was untrue) did NOT come from Sofia. However, there was a contract of sale and purchase of the property but this contract was not material with the freehold or leasehold status of the house. Danial cannot use his own assumption as a defend for his entering into a contract.
Hence, Danial cannot accuse Sofia of misrepresentation as his opinion of the "freehold" status is just his own personal opinion.
A good write up by John Clement is available online here.
1.FALSE STATEMENT OF FACT
An actionable misrepresentation must be a false statement of fact, not opinion or future intention or law.
STATEMENTS OF OPINION
A false statement of opinion is not a misrepresentation of fact, some expressions of opinion are mere puffs. However, where the person giving the statement was in a position to know the true facts and it can be proved that he could not reasonably have held such a view as a result, then his opinion will be treated as a statement of fact.
STATEMENTS AS TO THE FUTURE
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.
However, if a person knows that his promise, which has induced another to enter into a contract, will not in fact be carried out then he will be liable.
STATEMENTS OF THE LAW
A false statement as to the law is not actionable misrepresentation because everyone is presumed to know the law. However, the distinction between fact and law is not simple.
SILENCE
Generally, silence is not a misrepresentation. The effect of the maxim “caveat emptor” is that the other party has no duty to disclose problems voluntarily. Thus if one party is labouring under a misapprehension there is no duty on the other party to correct it.
However, there are three exceptions to this rule:
(i) HALF TRUTHS
The representor must not misleadingly tell only part of the truth. Thus, a statement that does not present the whole truth may be regarded as a misrepresentation.
(ii) 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.
(iii) CONTRACTS UBERRIMAE FIDEI
Contracts uberrimae fidei (contracts of the utmost good faith) impose a duty of disclosure of all material facts because one party is in a strong position to know the truth. Examples would include contracts of insurance and family settlements.
A material fact is something which would influence a reasonable person in making the contract. If one party fails to do this, the contract may be avoided.
OTHER REPRESENTATIONS
The term ‘statement’ is not to be interpreted too literally:
• In Gordon v Selico Ltd (1986) 278 EG 53, it was held that painting over dry rot, immediately prior to sale of the property, was a fraudulent misrepresentation.
• In St Marylebone Property v Payne (1994) 45 EG 156, the use of a photograph taken from the air, printed with arrows (misleadingly) indicating the extent of land boundaries, was held to convey a statement of fact (which amounted to actionable misrepresentation).
2. THE MISREPRESENTATION MUST HAVE INDUCED THE CONTRACT
The false statement must have induced the representee to enter into the contract. The requirements here are that (a) the misrepresentation must be material and (b) it must have been relied on.
MATERIALITY
The misrepresentation must be material, in the sense that it would have induced a reasonable person to enter into the contract. However, the rule is not strictly objective:
In Museprime Properties v Adhill Properties [1990] 36 EG 114, the judge referred, with approval, to the view of Goff and Jones: Law of Restitution that, any misrepresentation which induces a person to enter into a contract should be a ground for rescission of that contract. If the misrepresentation would have induced a reasonable person to enter into the contract, then the court will presume that the representee was so induced, and the onus will be on the representor to show that the representee did not rely on the misrepresentation either wholly or in part. If, however, the misrepresentation would not have induced a reasonable person to contract, the onus will be on the misrepresentee to show that the misrepresentation induced him to act as he did.
RELIANCE
The representee must have relied on the misrepresentation.
There will be no reliance if the misrepresentee was unaware of the misrepresentation.
There will be no reliance if the representee does not rely on the misrepresentation but on his own judgment or investigations. (Note: this rule does not apply where the misrepresentation was fraudulent and the representee was asked to check the accuracy of the statement: Pearson v Dublin Corp [1907] AC 351.)
There will be reliance even if the misrepresentee is given an opportunity to discover the truth but does not take the offer up. The misrepresentation will still be considered as an inducement.
There will be reliance even if the misrepresentation was not the only inducement for the representee to enter into the contract.
Ref:
https://www.ibblaw.co.uk/insights/blog/misrepresentation