To Create Liability for Misrepresentation

Misrepresentation is a contract law concept. It means a false statement of fact made by one party to another party, which has the effect of inducing that party into the contract. For example, under certain circumstances, false statements or promises made by a seller of goods regarding the quality or nature of the product that the seller has may constitute misrepresentation. A finding of misrepresentation allows for a remedy of rescission and sometimes damages depending on the type of misrepresentation. Misrepresentation is a tort, or a civil wrong and this means that a misrepresentation can create civil liability if it results in a pecuniary loss. For example, assume that a real estate speculator owns swampland but advertises it as valuable commercially zoned land. This is a misrepresentation. If someone buys the land relying on the speculator’s statement that it is commercially valuable, the buyer may sue the speculator for monetary losses resulting from the purchase.

To create liability for the maker of the statement, the listener or reader must rely on a misrepresentation. In addition, the speaker must know that the listener is relying on the factual correctness of the statement. Finally, the listener’s reliance on the statement must have been reasonable and justified, and the misrepresentation must have resulted in a pecuniary loss to the listener. A misrepresentation need not be intentionally false to create liability. A statement made with conscious ignorance or a reckless disregard for the truth can create liability. Nondisclosure of material or important facts by a fiduciary or an expert, such as a doctor, lawyer, or accountant, can result in liability. If the speaker is engaged in the business of selling products, any statement, no matter how innocent, may create liability if the statement concerns the character or quality of a product and the statement is not true. In such a case, the statement must be one of fact. This does not include so-called puffing, or the glowing opinions of a seller in the course of a sales pitch, such statements as “you will love this car,” or “it is a great deal”.

There are three types of misrepresentation and the first one is Fraudulent Misrepresentation. This kind of misrepresentation occurs when one makes representation with intent to deceive and with the knowledge, which is it false. An action for fraudulent misrepresentation allows for a remedy of damages and rescission. One also can sue for the fraudulent misrepresentation is capable of being making recklessly. Negligent also of the type in misrepresentation that is occurs when the defendant carelessly makes a representation while having no reasonable basic to believe it to be true. This type of misrepresentation is relatively new and was introduces to allow damages in situation where neither a collateral contract nor fraud is found. Besides that, innocent misrepresentation also including in this kind of misrepresentation and it occurs when they represent or had reasonable grounds for believing that his or her false statement was true Prior to Hedley Byrne, all misrepresentations that were not fraudulent were considered to be innocent. This type of representation primarily allows for a remedy of rescission, the purpose of which is the parties back into a position as if the contract had never taken place. Section 2 “Misrepresentation Act 1967″ however, allows damages to be award in lieu of rescission if the court deems it equitable to do so. This judged on both the nature of the innocent misrepresentation and the losses suffered by the claimant from it.

In this kind of case, we can see the Misrepresentation issues are about the computer. The seller that named Gina gave the false statement about a computer. This is all her statement about the computer; the computer is a large memory, it also reliable, looks fine and cheap and it just a computer for John the buyer. In this fact, based on the above promises, John bought the computer. John hesitates with the statement from Gina the salesperson. Before he has decided to buy that computer, he consults with his friend Hector who has expert about the computer. However, Hector always does not have time to and advise John with not properly. After that, the computer having its own problem where the memory run very slow. Gina asked John to bring back the computer for repairing but John did not bring the computer back to the shop. After around two weeks, the computer gave John a very big problem, which is the last two chapters on that computer were lost and because of mad and angry with the computer, he throws the computer away.

In this case, John also has his false, which the cheap computer is not necessary good or fine. He could have any related on another computer expert and he also should bring the computer back into the shop for repairing because of the warranty but he does not do so. The fact tells that, there are promises made. In fact, John related on the promises and based on the promises, he bought the computer. Since the promises for false statements there is misrepresentation happened here. We can say the remedy for this case that in this situation, that Gina can be say as fraudulent and this is because she has intension to cheat with John by saying that the computer has the large memory and it just suitable for John only. She already cheat with John and she will go to jail for what she have done. However, Gina also can said as a negligent in misrepresentation because she just a salesperson that do not have experience in computer. Besides, Gina also cannot be blamed because John also wrong in this case, where he is careless and he do not used the computer warranty wisely where he do not keep the duty of care, breaks the duty of care and the computer breaking down.

The other case, Gina also can be say as innocent in this situation. This is because, she do not know the manufacturers fault. She makes the statements upon that manufacture ask her to do. She also can said that she do not have intension to cheat with John relied on the computer. She did not know about the problem of the computer because she is not expert in computer and maybe she just a normal sales person in that computer company. Because of Gina do not give the true statements about the computer, she is said as a fraudulent and she must making the true statements about the computer. However, John still contributory to negligence because John contributed to his own negligence. He could have related with the computer expert but he do not do that and because he already through the computer away, he still can claim for it but the claim must be reduced because his own negligence.

Generally, the effect of misrepresentation is that it makes the contract voidable. This is important for two reasons. Firstly, because the represented can continue to be bound by the contract at his or her will. Secondly because the transactions and effects of the contract are recognized as to have taken place, therefore if a party transfers title of property to a third party of which the former only holds title to pursuant to the voided contract, the third party can retain legal title. Rescission can be done either by informing the represent or by requesting an order from the court. There are certain circumstances where rescission is not possible though. The idea behind rescission is that the parties restored to the positions they were before entering into the contract. Therefore, if this is not possible, rescission is not an option. If the represented discovers the misrepresentation and fails to take steps to avoid the contract, then he may not be able to rescind it. The time limit for taking such steps varies depending on the type of misrepresentation. In cases of fraudulent misrepresentation, the time limit runs until when the misrepresentation thought have been discover, whereas in innocent misrepresentation, the right to rescission may lapse even before the represented can reasonably expected to know about it.

For this case, John cannot get back his money back because he has thrown away the computer. According to rescission, John has to return the computer back so he can get his money back. If he wants to resists, he should return the computer back to the shop for repairing it after he found out that the computer has problem. This is mean, it is not possible for John to have rescission, but he only can sue the company for damages that he got after buying the computer. John cannot sue Gina because she just works under the company for the computer that John has brought.