Misrepresentation and Breach of Contract

There are two grounds of action which Michael may try to purse in this problem misrepresentation and breach of contract. If Michael can establish that the statement made by Jatinder are terms of the contract he may repudiate the contract and claim damages of condition or obtain damages for breach of warranty would consider the statement to be in nominate term.

It is most likely that Michael could use Fraudulent Misrepresentation as a remedy against Jatinder. Jatinder fraudulent misrepresentation is that she knew what state her car and was leaking from the petrol tank and it also been in a car accident which was her fault. The statement that she made was known to be untrue.

Fraudulent misrepresent is knowingly, or without belief in its truth, or recklessly, careless whether it is true or false1 (See Derry v Peek (1889) L.R. 14 App. Cas) 2. The description of the car that Jatinder made and the answers that she gave Michael were misrepresented by her knowing that the information was not true.

The false statement that Jatinder state was:

‘The car was in excellent condition and it was good for at least another 50,000 miles’ which was untrue, due to the fact that Michael discovered a leak in the petrol tank. This means that the car does only twelve miles to the gallon and it was involved in an accident three months prior to him buying the car which was caused by Jatinder.

The statement that was made is called an untrue statement. Under the traditional rule of caveat emptor ( Latin for ‘let the buyer beware’), a purchaser is required to ask questions about important matters if necessary, the seller is not usually expected to volunteer information which may put the buyer off.3

However, should Jatinder asset that her statements are only opinions, as in Bisset V Wilkinson (1927) AC 1774, she might be met with the argument that, as the owner of the car she should know what faults the car may have or had (see Smith v Land and House Property Corporation (1884) 28 Ch D 7)5. Also within the case of Brown v Raphael (1958) Ch 636 6 it was established that an opinion may be actionable as a misrepresentation where the representor is in a far stronger position to ascertain the facts than the respersentee. This is clearly relevant in Michael’s case. It is unlikely that Michael test driving the car would mean that he relies upon is own judgment, as was successfully pleaded in Attwood v Small (1838) 6 CL & F 232 7, for Michael test driving the car briefly did not show any damage until he bought it and finds out that it was damaged. ‘Let the buyer beware’ With Michael test driving the car and asking question Jatinder should have to Michael the truth about the leaking petrol tank and also the car accident that had. Jatinder should have made Michael bewares of the entire problem that the car had. Michael should have also checked for himself the car history before he bought the car to find out whether the statement was actually true.

In the case of Redgrave v Hurd (1881) 20 Ch D 1 8 it is clear that Michael’s opportunity to discover any defect is irrelevant: constructive knowledge is insufficient.

1. Elliot and Quinn, 2003, 4th Edition, Contract Law. Pg 145

2. Derry v Peek (1889) L.R. 14 App. Cas

3. Elliot and Quinn, 2003, 4th Edition, Contract Law. Pg 145

4. Bisset V Wilkinson (1927) AC 177

5. Smith v Land and House Property Corporation (1884) 28 Ch D 7 148

6. Brown v Raphael (1958) Ch 636

7. Attwood v Small (1838) 6 CL & F 232

8. Redgrave v Hurd (1881) LR 20 Ch D 1

Finally although Michael may have been partially induced to buy the car because of the answer that he got where what he wanted to hear but Jatinder cannot escape liability by pointing to other such contributory causes which Michael to enter into the contract. In the case of Edgington v Fitzmaurice (1885) 29 Ch D 459 10 emphasised that it is sufficient if the misrepresentation complained of is simply one of several competing inducements. It appears that Michael can consequently establish and actionable misrepresentation.

In addition to suing for damages, Michael who is the injured party may, as indicated, avoid the contract. Michael does not need to do that. He may consent himself with an action for damages. But he has a choice, to affirm to avoid the contract. If Michael decides to avoid the contract he will not need go to court; all he needs to do is to give notice, by words or conduct that refuses to be bound by it. The effect of the notice, if it is justifiable, means that the contract is cancelled. The person that Michael needs to give the notice to is the other party in the contract which is Jatinder. It could happen that the other party Jatinder being a fraud could disappear. This happened in the case of Car and Universal Finance Co Ltd v Caldwell (1965) CA)11. Where it was held that former owner done what he could in the circumstances and that his actions had successfully avoided the contract.

The party that was misled by a fraudulent misrepresentation may instead of, or as well as merely notifying his “avoidance” by applying to the courts for a formal order of “rescission”.

The general remedies for breach of contract are repudiation and/or damages, the misrepresentation the remedies are rescission and/or damages. The best way in comparing these remedies is to consider separately (a) the availability of repudiation and rescission and (b) the basis for awarding damages in each area. The interesting feature will be that whether the contract remedies will depend primarily upon whether the term which the defendant had broken is condition or a warranty; in misrepresentation it is the culpability of the defendant which will determine the claimant’s remedies. 12

The law stated on misrepresentation is relatively important of pre-contractual statements. If a false statement of fact has been made, the representee, in principle, will have the right to claim rescission and thereby avoid the contract. The respresentee must make it know that the statement induced him to enter the contract, i.e. that is was the important factor. (See Edgington v Fitzmaurice (1885) 29 Ch D 459)13.

Alternatively Michael could use the Misrepresentation Act 1967 .Within the Misrepresentation Act 1967 under section 1(a) it provides that the right to recession remains, notwithstanding that the representation has become a term of the contract.

Michael can use rescission for his remedy and apply for this to the court’s. Another effect of the Act, or at least of the way the Act has been interpreted by judges, is to allow the claimant to recover not just foreseeable losses, but all direct losses. This seems to follow from the wording that the Act says that a misrepresentation should be treated as deceitful, despite there being no dishonesty; unless the defendant can show that he was not negligent.

10. Edgington v Fitzmaurice (1885) 29 Ch D 459

11. Car and Universal Finance Co Ltd v Caldwell (1965) CA)

12. Mckendrick, 2007, 7th edition, Contract Law, pg.290

13. See Edgington v Fitzmaurice (1885) 29 Ch D 459

It seem unlikely to me that the creators of the statute had in mind that damages for negligent misrepresentation should be as extensive as fraudulent misrepresentation but there are a number of cases that suggest that judges don’t see things the same way.

He will want to do this if Jatinder refuses to hand back what the misled party has paid or transferred under the contract this is a process called restitution. When a person has been induced by fraud to enter into a contract, he need to only hand back what he got under the contract if he sues for rescission. Michael will have to hand back the car to Jatinder has that is what he got under the contract if he is to sue her in court. If Michael is taken to court by Jatinder he can plead fraud as a defence and still refuse to return what he got under the contract.

Rescission does not occur automatically when a misrepresentation is made this I because misrepresentation renders a contract voidable. Therefore the representee can elect either to rescind or to affirm the contract. If Michael decides to rescind, the general rules is that he must bring his decision to rescind to the notice of the Jatinder. Michael need to show is rescind in many different ways, by seeking a declaration that the contract is invalid, restoring what he has obtained under the contract by relying upon the misrepresentation as a defence to an action on the contract like in the case of Redgrave v Hurd. If Jatinder can not be found Michael can inform the police this happened in the case of Car & Universal Finance Co v Caldwell (1965) 1 QB 525 14 this can make the contract rescind.

Rescission alone may have the effect of restoring the parties to their original positions, but may not do so where the representee had incurred consequential expenses. It is implicit in what had been said that fraud is a defence to an action by the defrauder.

14. Car & Universal Finance Co v Caldwell (1965) 1 QB 525