Professor Catharine MacMillan

The Dickson Poon School of Law

KING’S COLLEGE LONDON
NOVEMBER 2019

This lecture outline is based upon the Vitiating Elements case list and
provides a more extended and detailed treatment of the subject. It will
be used as a basis for the lectures in Misrepresentation. (It will not be
provided in the examinations although the Contract Vitiating Factors Case
List, posted in this section on KEATS, will be so provided).

Key Learning Objectives

This topic introduces the effect upon an otherwise valid contract of a
misrepresentation made prior to entering into a contract.
- The elements necessary to make a statement actionable as a
misrepresentation
- What is required to establish different types of misrepresentations
- When damages will be paid for a misrepresentation and how these
damages are calculated
- When the remedy of rescission will be granted for a
misrepresentation
- The comparative advantages of the different remedies available for
misrepresentation
- The limits placed upon an exclusion of liability for misrepresentation

Reading:
Anson, chapter 9
McKendrick, casebook, chapter 17
Morgan, Great Debates in Contract Law, chapter 6

You may also wish to refer also to one of:
Davies, JC Smith’s The Law of Contract, ch 16
McKendrick, Contract Law, ch 13
O’Sullivan & Hilliard, The Law of Contract, ch 10

! denotes a significant case

I. The concept of misrepresentation

We are concerned here with the effect of express statements made prior to
entering into a contract. These statements may become terms of the contract or
they may be ‘mere’ representations. If the statement is a term of the contract
© Professor C.A. MacMillan November 2019 1


which proves to be false an action will lie for a breach of contract (something we
will consider at the end of this module). In contrast, a ‘mere’ representation may
be actionable as a misrepresentation. An actionable misrepresentation is an
unambiguous false statement of existing fact or law which induced a party to
enter into the contract. In a limited number of circumstances a failure to disclose
a matter may be treated as a misrepresentation. The potential remedies for a
misrepresentation are a rescission of the contract and damages. The right to
rescind (an equitable remedy) can be lost. The amount of damages, if any, will
depend upon whether the misrepresentation was innocent, negligent or
fraudulent. Damages may be available at common law for the torts of deceit or
negligent misstatement. The Misrepresentation Act 1967 also provides that
damages may be awarded for a misrepresentation.

Where a party attempts to exclude liability for a misrepresentation the terms
which attempt to do this will be regulated by legislation. Where the contract is a
commercial one, an attempt to exclude liability will generally be subject to the
test of reasonableness in the Unfair Contract Terms Act 1977 by virtue of the
Misrepresentation Act 1967, s. 3. Where the contract is one between a trader
and a consumer, however, there is a different legislative regime and the term will
be subject to a test of fairness under the Consumer Rights Act 2015, s. 62 and
Schedule 4.


II. The difference between misrepresentations and warranties
The determination of whether or not a pre-contractual statement was a term of
the contract was more important before 1967 than it is today because:
-The remedies for misrepresentation were limited; and
-When a misrepresentation was incorporated as a contractual term the
remedy of rescission for misrepresentation was lost.

Both of these factors were changed by the Misrepresentation Act 1967. There are
now much more extensive remedies in damages available for misrepresentation
(under s.2 of the Act) and s.1(a) provides that a contract may be rescinded for
misrepresentation, even if the misrepresentation is also a term of the contract.
The question may, however, still be of importance. If, for example, the pre-
contractual statement is in the form of a promise rather than a statement of fact
then a remedy for misrepresentation is unlikely to be available. The only
possible argument for the claimant will therefore be to show that the statement
had become a term of the contract.

!Heilbut, Symons & Co v Buckleton [1913] AC 30
"They must be proved strictly. Not only the terms of such contracts but the
existence of an animus contrahendi on the part of all the parties to them must be
clearly shown."


Clark Goldring & Page Limited v ANC Limited (2001)




© Professor C.A. MacMillan November 2019 2


!Oscar Chess Ltd v Williams [1957] 1 WLR 370 at 375

"It is sometimes supposed that the tribunal must look into the minds of the
parties to see what they themselves intended. That is a mistake. . . . The question
of whether a warranty was intended depends on the conduct of the parties, on
their words and behaviour, rather than their thoughts. If an intelligent
bystander would reasonably infer that a warranty was intended that will
suffice."


III. The requirements of an actionable misrepresentation
In order for a misrepresentation to be actionable, it must induce the person to
whom it is addressed to make a contract. This simply means that the statement
must be one of the factors which led the person to enter into the contract – it does
not have to be the sole or main reason.

For a misrepresentation to be actionable it must be a false statement of existing
fact or law. A statement of opinion is not generally a misrepresentation – see
Bisset v Wilkinson (1927). Two exceptions exist. The first is where the person
expressing the opinion is aware of facts which indicate that the opinion cannot
be sustained. Thus, in Smith v Land House Corporation (1884) a tenant who, the
landlord knew, was behind with the rent could not be described as a ‘most
desirable tenant’. The landlord’s statement to this effect was therefore a
misrepresentation (see also Esso Petroleum Co Ltd v Mardon (1976)).

The second exception, which can lead to a statement of opinion being treated as
a false statement of fact, is where there is evidence that the person making the
statement does not believe it at the time that it is made. Proof that the maker of
the statement was aware of contradictory facts may prove that they did not
believe the statement was true. See Edgington v Fitzmaurice (1885), where it
was held that the ‘state of a man’s mind is as much a fact as the state of his
digestion’. The fact falsely stated in these cases is the speaker’s state of mind. The
speaker represents the fact that he or she believes that what is being said is true,
whereas in fact no such belief is held.

The Edgington v Fitzmaurice approach can also be used to turn statements of
intention into misrepresentations, if at the time of making the statement, the
person did not have the stated intention. (This was, in fact, the situation in
Edgington v Fitzmaurice itself.)

Traditionally, statements of law were not regarded as being statements which, if
false, will give rise to remedies for misrepresentation. It seems, however, that
now that the House of Lords has recognised the possibility of restitutionary
remedies for mistake of law (in Kleinwort Benson Ltd v Lincoln City Council
(1999)), the same approach may well apply in the area of misrepresentation.
This was the view of the High Court in Pankhania v Hackney London Borough
Council (2002). In any case, if the statement of law is not believed by the person
making it, then the principle in Edgington v Fitzmaurice will apply, so that the
statement will be treated as a misrepresentation of the person’s state of mind.

Lambert v Co-Operative Insurance Society Ltd [1975] 2 Lloyd's Rep. 485 – a
contract treated as being ‘of the utmost good faith’ (uberrimae fidei). Disclosure
© Professor C.A. MacMillan November 2019 3


required, regardless of questioning. Is there a general duty of good faith? Yam

Seng Pte v International Trade Corp [2013] EWHC 111 indicates so but this has
not been received in appellate decisions, Mid Essex Hospital Services NHS Trust v
Compass Group UK and Ireland Ltd [2013] EWCA Civ 200.

Dimmock v Hallet [1860] L.R. 2 Ch App 21
Gordon v Sellico (1986) 278 EG 53

A. The representation must be false
Is the statement false within the requirements of making a claim for
misrepresentation?

Dimmock v Hallet [1860] L.R. Ch. App. 21

Can keeping silent about a statement which is true when made but subsequently
becomes false be a misrepresentation?
With v O'Flanagan [1936] Ch. 575
Misrepresentation Act 1967, s. 2(1)

Conlon v Simms [2006] EWHC 401 – non-disclosure


B. The representation must be one of fact, not of opinion
!Bisset v Wilkinson [1927] AC 177
"If a reasonable man with the vendor's knowledge could not have come to the
conclusion he stated, the description of that conclusion as an opinion would not
necessarily protect him against rescission for misrepresentation, but what was
actually the capacity in competent hands of the land the purchasers purchased
had never been, and never was practically ascertained."

A statement of opinion is not generally a misrepresentation but exceptions exist
to this rule.
!Esso Petroleum Ltd v Mardon [1976] QB 801

Smith v Land and House Property Corp (1884) 28 Ch D 7
"the facts are equally known to both parties, what one says to the other is
frequently nothing but an expression of opinion . . . But if the facts are not equally
well known to both sides, then a statement of opinion by one who knows the
facts best involves very often a statement of material fact, for he impliedly states
that he knows facts which justify his opinion."




C. The representation must be one of fact, not of intention
Wales v Wadham [1977] 1 WLR 199

Edgington v Fitzmaurice [1885] 29 Ch D 459
"there must be a mis-statement of an existing fact; but the state of a man's mind
is as much a fact as the state of his digestion. It is true that it is very difficult to
prove what the state of a man's mind at a particular time is, but if it can be
© Professor C.A. MacMillan November 2019 4


ascertained it is as much a fact as anything else. A misrepresentation as to the

state of a man's mind is, therefore, a mis-statement of fact."


Limit No2 Ltd v Axa Versicherung AG [2008] EWCA Civ 1231
The words ‘would not normally write construction unless...’ was a statement of
intention which was a representation of existing fact.


D. May the representation be one of law?
Traditionally, statements of law were not capable of being misrepresentations
but the situation has now changed.

Pankhania v Hackney London Borough Council [2002] EWHC 2441 (Ch) applying
the House of Lords’ decision in Kleinwort Benson Ltd v Lincoln City Council (1999)
to contract law.


E. The representation must be addressed to the party misled
Commercial Banking Co of Sydney v RH Brown and Co [1972] 2 Lloyd's Rep 360


F. The representation must be intended to be acted upon
Peek v Gurney [1873] L.R. 6 HL 377
Andrews v Mockford [1896] 1 QB 372


G. The representation must induce the contract and it must (in
that sense) be material
In order for a misrepresentation to be actionable, it must induce the person to
whom it is addressed to make a contract. This simply means that the statement
must be one of the factors which led the person to enter into the contract – it
does not have to be the sole or main reason. It is not sufficient, however, for the
claimant to demonstrate that ‘he was supported or encouraged in reaching his
decision by the representation in question’. The representation must play a real
and substantial part of the claimant’s decision to enter into the contract. It does
not matter that the claimant had the opportunity to discover the untruth of the
statement but did not take the opportunity. In Redgrave v Hurd (1881) the
purchaser of a solicitor’s practice had the opportunity to consult documents
which would have revealed the falsity of the seller’s statement about the
practice’s income. His failure to do so did not preclude his later claim based on
misrepresentation.

If the misrepresentation would have induced a reasonable person to contract,
the court will presume that it did so induce the representee to contract. The
representor must then show that the representee did not rely upon the
representation. Where, however, the misrepresentation would not have induced
a reasonable person to enter into the contract, the onus falls upon the
representee to show that the misrepresentation did, in fact, induce him to
contract

© Professor C.A. MacMillan November 2019 5


Dimmock v Hallet (1866) LR 2 Ch App 21

!JEB Fasteners v Marks, Bloom and Co [1983] 1 All ER 583
Horsfall v Thomas (1862) 1 H & C 90
Smith v Chadwick (1884) 9 App Cas 187
Atwood v Small (1838) 6 Cl & F 232
Redgrave v Hurd (1881) 20 Ch D 1
!Smith v Eric S Bush [1990] 1 AC 831
Edgington v Fitzmaurice [1885] 29 Ch D 459

BV Nederlandse Industrie van Eiproducten v Rembrandt Enterprises, Inc [2019]
EWCA Civ 596
‘[T]here is an evidential presumption of fact (not law) that a representee will
have been induced by a fraudulent representation intended to cause him to enter
the contract and that the inference will be “very difficult to rebut” ‘. [43] per
Longmore LJ and it is required that ‘the representee . . . prove inducement albeit
with the assistance of a presumption that “will be very difficult to rebut” ‘. [at 45]

A question of fact: Zurich Insurance Co plc v Hayward [2016] UKSC 48; [2016] 3
WLR 637

IV. Types of misrepresentations

The distinction between these categories is vital in determining the remedies
which may be available to the person relying on the statement. It is also
important to remember that a claimant is required to establish different matters
to prove different types of misrepresentation. As a general observation, where
the misrepresentation is made by another party to the contract, the easiest claim
to prove will be under s.2(1) of the Misrepresentation Act, 1967.

A. Fraudulent
– the maker of the statement knows or believes that the statement is untrue, or
makes it not caring whether it is true or false. A fraudulent misrepresentation is
actionable as the tort of deceit. The burden of proving the fraud is a heavy one
and lies with the claimant.

!Derry v Peek (1889) 14 App. Cas. 337
Doyle v Olby (Ironmongers) ltd [1969] 2 Q.B. 158
Archer v Brown [1984] 2 All E.R. 267
East v Maurer [1991] 2 All E.R. 733
Zurich Insurance Co plc v Hayward [2016] UKSC 48; [2016] 3 WLR 637


B. Innocent
– the maker of the statement genuinely believes it is true, and does not act
negligently (at common law or under statute) in making it.

Newbiggin v Adam (1866) 34 Ch. D. 582
Whittington v Seal Hayne (1900) 82 LT 49


© Professor C.A. MacMillan November 2019 6


C. Negligent
The maker of the statement and the person relying upon it are in some sort of a
‘special relationship’ which gives rise to a duty of care or is one by which the
maker assumes responsibility towards the receiver. The maker of the statement
fails to take care in making the statement. The tort of negligent misstatement
was identified in Hedley Byrne v Heller (1964). Note that in many cases it may
now be preferable to bring an action under the Misrepresentation Act, 1967.

(1) The Duty of Care Principle
– the maker of the statement and the person relying on it are in a ‘special
relationship’ giving rise to a duty of care under the principles of Hedley Byrne v
Heller (1964) and the maker of the statement acts in breach of this duty.

!Hedley Byrne & Co Ltd v Heller Partners Ltd (1964) A.C. 465; [1963] 3 WLR
101; [1963] 2 All ER 375
"if someone possessed of a special skill undertakes, quite irrespective of
contract, to apply that skill for the assistance of another person who relies upon
such skill, a duty of care will arise. The fact that the service is to be given by
means of or by the instrumentality of words can make no difference.
Furthermore, if in a sphere in which a person is so placed that others could
reasonably rely upon his judgment or his skill or upon his ability to make careful
inquiry, a person takes it upon himself to give information or advice to, or allows
his information or advice to be passed on to, another person who, as he knows or
should know, will place reliance upon it, then a duty of care will arise." [at 502-
503]

Playboy Club London Ltd v Banca Nazionale del Lavoro SpA [2018] UKSC 43


(2) The Assumption of Responsibility Principle
!Henderson v Merrett Syndicates Ltd [1995] 2 A.C. 145; [1994] 3 W.L.R. 761;
[1994] 3 All E.R. 506
“if a person assumes responsibility to another in respect of certain services,
there is no reason why he should not be liable in damages for that other in
respect of economic loss which flows from the negligent performance of those
services.” [[1994] 3 W.L.R. 761 at 776]

P&P Property Ltd v Owen White & Catlin LLP; Dreamvar (UK) Ltd v Mishcon De
Reya [2018] EWCA Civ 1082


(3) Concurrent duties in tort and contract
Esso Petroleum Co Ltd v Mardon

Henderson v Merrett Syndicates Ltd [1994] 3 W.L.R. 761
“the common law is not antipathetic to concurrent liability, and that there is no
sound basis for a rule which automatically restricts the claimant to either a
tortious or a contractual remedy. The result may be untidy; but, given that the
tortious duty is imposed by the general law, and the contractual duty is
attributable to the will of the parties, I do not find it objectionable that the
© Professor C.A. MacMillan November 2019 7


claimant may be entitled to take advantage of the remedy which is most

advantageous to him . . . “. (per Lord Goff at 788)

Wellesley Partners LLP v Withers LLP [2015] EWCA Civ 1146


D Statutory
– the maker of the statement has no reasonable grounds for believing it to be
true (s.2(1) Misrepresentation Act 1967). The enactment of the
Misrepresentation Act fundamentally changed the landscape of this area of law.
This is something to bear in mind when reading earlier cases.

!Misrepresentation Act 1967, s. 2(1)
"Where a person has entered into a contract after a misrepresentation has been
made to him by another party thereto and as a result thereof he has suffered
loss, then, if the person making the misrepresentation would be liable in
damages in respect thereof had the misrepresentation been made fraudulently,
that person shall be so liable notwithstanding that the misrepresentation was
not made fraudulently, unless he proves that he had reasonable ground to
believe and did believe up to the time the contract was made that the facts
represented were true."

Resolute Maritime Inc v Nippon Kaiji Kyokai [1983] 2 All ER 1
!Howard Marine and Dredging Co v Ogden & Sons Ltd [1978] 2 WLR 514; [1978]
QB 574; [1978] 2 All ER 355
Royscot Trust Ltd v Rogerson [1991] 2 Q.B. 297
Spice Girls Ltd v Aprilia World Service BV [2002] EWCA Civ 15, [2002] E.M.L.R. 27

V. Remedies for misrepresentations

The remedies for a misrepresentation depend on whether it was made
innocently, negligently or fraudulently. There are potential remedies available
under the common law (both in contract and tort) and under statute (the
Misrepresentation Act 1967). The main categories of remedies are:
1. rescission of the contract; and
2. damages for losses arising from the misrepresentation


A. Damages
The common law was late in recognizing a right to damages for non-fraudulent
misrepresentations. An innocent misrepresentation only entitled a party to
rescind the contract – a situation which often left them with substantial damages
(eg Wittington v Seal-Hayne) which were left uncompensated.

In contrast, a fraudulent misrepresentation could constitute the tort of deceit, for
which damages are available.

Note that the underlying principles by which damages are assessed and limited
in misrepresentation are different than those from a breach of contract. The
© Professor C.A. MacMillan November 2019 8


former actions lie in tort (negligent mis-statement or deceit) while the latter lie
in contract.

(1) Fraudulent Misrepresentation
Archer v Brown [1984] 2 All ER 267
East v Maurer [1991] 2 All ER 733
!Doyle v Olby (Ironmongers) Ltd [1969] 2 QB 158 at 167
"in contract, the defendant has made a promise and broken it. The object of
damages is to put the plaintiff in as good a position, as far as money can do it, as
if the promise had been performed. In fraud, the defendant has been guilty of a
deliberate wrong by inducing the plaintiff to act to his detriment. The object of
damages is to compensate the plaintiff for all the loss he has suffered, so far,
again, as money can do it. In contract, the damages are limited to what may
reasonably be supposed to have been in the contemplation of the parties. In
fraud, they are not so limited. The defendant is bound to make reparation for all
the actual damages directly flowing from the fraudulent inducement. The person
who has been defrauded is entitled to say:

"I would not have entered into this bargain at all but for your
representation. Owing to your fraud, I have not only lost all the money I
paid you, but, what is more, I have been put to a large amount of extra
expense as well and suffered this or that extra damages."

Smith New Court Securities Ltd v Citibank N.A. [1997] A.C. 254

4 Eng Ltd v Harper and Simpson [2008] EWHC 915 (Ch) – damages available in
deceit for the loss of a chance.


(2) Negligent Misrepresentation
Hedley Byrne & Co Ltd v Heller Partners Ltd (1964) A.C. 465; [1963] 3 WLR 101;
[1963] 2 All ER 375

The normal rule of remoteness is that the injury was "reasonably foreseeable":
see Esso Petroleum v Mardon [1976] QB 801 at 822.

!IFE Fund SA v GSI International [2007] EWCA Civ 811

South Australia Asset Management Corp v York Montague Ltd [1997] AC 191 at
213; [1996] 3 All ER 365 at 371:
'A mountaineer about to undertake a difficult climb is concerned about
the fitness of his knee. He goes to a doctor who negligently makes a
superficial examination and pronounces the knee fit. The climber goes on
the expedition, which he would not have undertaken if the doctor had told
him the true state of his knee. He suffers an injury which is an entirely
foreseeable consequence of mountaineering, but has nothing to do with
his knee.' [per Lord Hoffmann]

Hughes-Holland v BPE Solicitors [2017] UKSC 21, [2017] 3 All ER 969
[40] “In cases falling within Lord Hoffmann's 'advice' category, it is left to the
adviser to consider what matters should be taken into account in deciding
© Professor C.A. MacMillan November 2019 9


whether to enter into the transaction. His duty is to consider all relevant matters
and not only specific factors in the decision. If one of those matters is negligently
ignored or misjudged, and this proves to be critical to the decision, the client will
in principle be entitled to recover all loss flowing from the transaction which he
should have protected his client against. The House of Lords might have said of
the 'advice' cases that the client was entitled to the losses flowing from the
transaction if they were not just attributable to risks within the scope of the
adviser's duty but to risks which had been negligently assessed by the adviser. In
the great majority of cases, this would have assimilated the two categories. An
'adviser' would simply have been legally responsible for a wider range of
informational errors. But in a case where the adviser is responsible for guiding
the whole decision-making process, there is a certain pragmatic justice in the
test that the Appellate Committee preferred. If the adviser has a duty to protect
his client (so far as due care can do it) against the full range of risks associated
with a potential transaction, the client will not have retained responsibility for
any of them. The adviser's responsibility extends to the decision. If the adviser
has negligently assessed risk A, the result is that the overall riskiness of the
transaction has been understated. If the client would not have entered into the
transaction on a careful assessment of its overall merits, the fact that the loss
may have resulted from risks B, C or D should not matter.”

[41] “By comparison, in the 'information' category, a professional adviser
contributes a limited part of the material on which his client will rely in deciding
whether to enter into a prospective transaction, but the process of identifying
the other relevant considerations and the overall assessment of the commercial
merits of the transaction are exclusively matters for the client . . . In such a case . .
. the defendant's legal responsibility does not extend to the decision itself. It
follows that even if the material which the defendant supplied is known to be
critical to the decision to enter into the transaction, he is liable only for the
financial consequences of its being wrong and not for the financial consequences
of the claimant entering into the transaction so far as these are greater.
Otherwise the defendant would become the underwriter of the financial fortunes
of the whole transaction by virtue of having assumed a duty of care in relation to
just one element of someone else's decision.” (per Lord Sumption)


(3) Misrepresentation Act 1967, s. 2

(a) Subsection (1)
Misrepresentation Act s.2(1)
"Where a person has entered into a contract after a misrepresentation has been
made to him by another party thereto and as a result thereof he has suffered loss,
then, if the person making the misrepresentation would be liable in damages in
respect thereof had the misrepresentation been made fraudulently, that person
shall be so liable notwithstanding that the misrepresentation was not made
fraudulently, unless he proves that he had reasonable ground to believe and did
believe up to the time the contract was made that the facts represented were true."

Naughton v O'Callaghan [1990] 3 All ER 191
East v Maurer [1991] 2 All E.R. 733
!!Royscot Trust v Rogerson [1991] 2 Q.B. 297
© Professor C.A. MacMillan November 2019 10


"in view of the wording of the subsection it is difficult to see how the measure of
damages under it could be other than the tortious measure and, despite the
initial aberrations referred to above, that is now generally accepted."

Smith New Court Securities Ltd v Citibank N.A. [1997] A.C. 254 at 283: [the court
is reluctant to find that] “the rather loose wording of the statute ‘ compels the
court to treat a person who was morally innocent as if he was guilty of fraud
when it comes to the measure of damages.”

Forest International Gaskets Limited v. Fosters Marketing Limited [2005] EWCA
Civ 700 [at paras 11-17]

Foster v Action Aviation Ltd [2013] EWHC 2439 (Comm); appeal allowed [2014]
EWCA Civ 1368

Lost profit from alternatives as a part of the reliance measure: Yam Seng Pte Ltd
v International Trade Corporation Ltd [2013] EWHC 111 (QB); [2013] 1 All ER
(Comm) 1321

!Taberna Eruope CDO II plc v Selskabet AF 1.September 2008 (formerly Roskilde
Bank A/S) [2016] EWCA Civ 1262, [2017] 3 All ER 1046
‘the background to the legislation and the language of s 2(1) itself read in the
context of s 2(2) point to the conclusion that it is concerned only with
representations made by a person who enters into a contract with the
representee and with losses arising as a result of entering into that contract.’
[44] . . . Section 2(1) of the Misrepresentation Act 1967 creates a form of
statutory liability sounding in negligence. In principle, therefore, contributory
negligence ought to be available as a defence . . .. [52] (per Moore-Bick LJ)



(b) Subsection (2)
Misrepresentation Act 1967 s. 2(2):
"Where a person has entered into a contract after a misrepresentation has been
made to him otherwise than fraudulently, and he would be entitled, by reason of
the misrepresentation, to rescind the contract, then, if it is claimed, in any
proceedings arising out of the contract, that the contract ought to be or has been
rescinded, the court or arbitrator may declare the contract subsisting and award
damages in lieu of rescission, if of opinion that it would be equitable to do so,
having regard to the nature of the misrepresentation and the loss that would be
caused by it if the contract were upheld, as well as to the loss that rescission would
cause to the other party."

"Damages may be awarded against a person under subsection (2) of this section
whether or not he is liable to damages under subsection(1) thereof, but where he is
so liable any award under the said subsection (2) shall be taken into account in
assessing his liability under the said subsection (1)."

!William Sindall plc v Cambridgeshire County Council [1994] 3 All ER 932


© Professor C.A. MacMillan November 2019 11


!Salt v Stratstone Specialist Ltd (t/a Stratstone Cadillac Newcastle) [2015] EWCA
Civ 745
[17] ”The point appears to be open at the level of the Court of Appeal. The words
of the statute are ‘if it is claimed … that the contract ought to be or has been
rescinded the court … may declare the contract subsisting and award damages in
lieu of rescission’. No doubt a claimant can be said to make a claim even if he is
subsequently held not to be entitled to do so. But the words ‘in lieu of rescission’
must, in my view, carry with them the implication that rescission is available (or
was available at the time the contract was rescinded). If it is not (or was not
available in law) because e.g. the contract has been affirmed, third party rights
have intervened, an excessive time has elapsed or restitution has become
impossible, rescission is not available and damages cannot be said to be awarded
‘in lieu of rescission’.
[18] “On the hypothesis, therefore, that DJ Hickman was correct to say that
restitutio in integrum was not possible, the discretion under section 2(2) to
award damages was not available to him.” (per Longmore LJ)

(4) Misrepresentation Act, s. 3
Contractual exclusions or restrictions of liability or remedies for
misrepresentations are only effective to the extent that they are reasonable
under s. 11(1) of the Unfair Contract Terms Act 1977:

s. 3(1) If a contract contains a term which would exclude or restrict—
(a) any liability to which a party to a contract may be subject by reason of
any misrepresentation made by him before the contract was made; or
(b) any remedy available to another party to the contract by reason of such
a misrepresentation,
that term shall be of no effect except in so far as it satisfies the requirement of
reasonableness as stated in s11(1) of the Unfair Contract Terms Act 1977; and it is
for those claiming that the term satisfies that requirement to show that it does.


Raiffeisen Zenbtralbank Osterreich AG v Royal Bank of Scotland plc [2010] EWHC
1392 (Comm)
AXA Sun Life Services plc v Campbell Martin Ltd [2011] EWCA Civ 133

Note that s. 3 does not apply to a contract between a consumer and a trader:
Misrepresentation Act 1967, s3(2) This section does not apply to a term in a
consumer contract within the meaning of Part 2 of the Consumer Rights Act

s. 62 Consumer Rights Act 2015 provides that an unfair term of a consumer
contract between a trader and a consumer is not binding upon a consumer.
‘Consumer’ is defined in s. 2(3) as ‘an individual acting for purposes that are
wholly or mainly outside that individual's trade, business, craft or profession’;
‘trader’ is defined in s.2(2) as ‘a person acting for purposes relating to that
person's trade, business, craft or profession, whether acting personally or
through another person acting in the trader's name or on the trader's behalf’.

s. 62 of the Consumer Rights Act 2015 provides the means by which it is to be
determined if a term is unfair.

© Professor C.A. MacMillan November 2019 12


IFE Fund SA v GSI International [2007] EWCA Civ 811

‘The foundation for liability for negligent misstatements demonstrates that
where the terms on which someone is prepared to give advice or make a
statement negatives any assumption of responsibility, no duty of care will be
owed. Although there might be cases where the law would impose a duty by
virtue of a particular state of facts despite an attempt not “to assume
responsibility”, the relationship between GSI either as arranger or as vendor
would not be one of them.’ ([28] per Waller LJ)


!Taberna Eruope CDO II plc v Selskabet AF 1.September 2008 (formerly Roskilde
Bank A/S) [2016] EWCA Civ 1262, [2017] 3 All ER 1046



B. Rescission
The principal common law remedy for a misrepresentation which induced a
contract was rescission. This was, and is still, available whether the
representation was innocent, negligent or fraudulent. ‘Rescission’ in this context
means that the contract is set aside, and the parties put into the position they
would have been in had the contract never been made. Any goods or money
which have been exchanged must be returned.

The remedy of rescission must be sought by the claimant: it does not occur
automatically. Until rescission has taken place, the contract will continue to exist.
In other words, misrepresentation renders a contract ‘voidable’ rather than
‘void’. Generally speaking the right of rescission will be exercised by giving
notice to the other party. There is one authority, however, which holds that
rescission can be effected by giving notice to relevant third parties.

(1) The nature of rescission
!Car & Universal Finance v Caldwell [1965] 1 QB 525
Inntrepreneur Pub Co (CPC) Ltd v Sweeney [2002] EWHC 1060, The Times June
26, 2002


(2) Misrepresentation incorporated as a term of the contract
Pennsylvania Shipping Co v Compagnie Nationale de Navigation [1936] 2 All ER
1167
Misrepresentation Act 1967, s. 1(a)


(3) The plaintiff's choice between seeking rescission and
claiming damages for fraud (where a fraudulent misrepresentation)
Archer v Brown [1984] 2 All ER 267


(4) Rescission and an indemnity
Whittington v Seal Hayne (1900) 82 LT 49


© Professor C.A. MacMillan November 2019 13


(5) Restrictions on the right to rescind

There are some situations in which the right to rescind is lost with the result that
the innocent party cannot rescind the contract. These situations are often
referred to as ‘bars’ to rescission.

(a) Restitution impossible
!Erlanger v New Sombrero Phosphate Co (1873) 2 App. Cas. 1218 at 1278
T.S.B. Bank plc v Camfield [1995] 1 W.L.R. 430

!Salt v Stratstone Specialist Ltd (t/a Stratstone Cadillac Newcastle) [2015] EWCA
Civ 745


(b) Affirmation/Lapse of Time, Estoppel
!Leaf v International Galleries [1950] 2 KB 86
!Salt v Stratstone Specialist Ltd (t/a Stratstone Cadillac Newcastle) [2015] EWCA
Civ 745
“Whatever the position under the current law, I think that it will then no longer
be possible to align the equitable right to rescind for pre-contractual
misrepresentation with the statutory scheme governing contractual rights. “
([46] per Roth LJ)

Long v Lloyd [1958] 1 WLR 753
Peyman v Lanjani [1985] 2 WLR 154; [1984] 3 All ER 703



(c) Third party rights
Phillips v Brooks [1919] 2 KB 243
!Car & Universal Finance v Caldwell [1965] 1 QB 525

VI. Exclusion of liability for misrepresentations

Unfair Contract Terms Act 1977

Walker v Boyle [1982] 1 All ER 634
Witter Ltd v TBP Industries [1996]2 All ER 573.
HIH Casualty & General Insurance Ltd v Chase Manhattan Bank, Chase Manhattan
Bank v HIH Casualty & General Insurance Ltd [2003] UKHL 6, [2003] 1 All E.R.
(Comm) 349
First Tower Trustees Ltd and another v CDS (Superstores International) Ltd
[2017] EWHC 891 (Ch), [2017] 4 WLR 73


FURTHER READING ON MISREPRESENTATION
If you would like to extend your knowledge of the topic of misrepresentation,
you may wish to look at one of the following articles available through the KCL
databases:

• Richard Buxton, ‘How the common law gets made: Hedley Byrne and
other cautionary tales’, (2009) 125 LQR 60
© Professor C.A. MacMillan November 2019 14


• Hooley, ‘Damages and the Misrepresentation Act 1967’, (1991) 107 L.Q.R.
547
• Taylor, ‘Expectation, Reliance and Misrepresentation’, (1982) 45 MLR 139

© Professor C.A. MacMillan November 2019 15