MISREPRESENTATION

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.
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.

Edgington v Fitzmaurice (1885) 29 Ch D 459. Company directors sent shareholders a

prospectus inviting subscriptions for debenture bonds. It said money would go to alter their
buildings, buy horses, vans and expand into supplying fish. Really though, the purpose was to
pay off liabilities, because the company was in trouble. Mistakenly believing he would get a first
charge on company property, Mr Edgington bought bonds. He would have bought them anyway,
had he known he would have no charge. Mr Edgington sought to recover money for deceit.

The Court of Appeal upheld Denman J at first instance, saying that the directors liable for deceit.
Cotton LJ held that the statement of purpose was a fraudulent misrepresentation and Mr
Edgington had relied on that despite his admission of mistake over charges. He said,

‘It was a statement of intention, but it is nevertheless a statement of fact, and if it could not be
fairly said that the objects of the issue of the debentures were those which were stated in the
prospectus the Defendants were stating a fact which was not true…’

To fulfil the requirement that Mr Edgington relied on the statement, it is not necessary to show
the misstatement was the sole cause of acting, so long as there was an influence.

Bowen LJ said ‘the state of a man’s mind is as much a fact as the state of his digestion… A
misrepresentation as to the state of a man’s mind is, therefore, a misstatement of fact... such
misstatement was material if it was actively present to his mind when he decided to advance his
money.’

Fry LJ said the ‘inquiry is whether this statement materially affected the conduct of the Plaintiff
in advancing his money.’ He pointed out the ‘prospectus was intended to influence the mind of
the reader.’

FALSE STATEMENT OF FACT

An actionable misrepresentation must be a false statement of fact, not opinion or future intention
or law.

This case is misrepresentation with the false statement of fact in which Kinston want to sell
Sam, when he dramatically deterioration in his skills. As a reference of , in Smith v Land and
House Property Corporation Land and House Property Corp (LHP) contracted with Mr Smith
to buy the freehold title of the Marine Hotel at Walton-on-the-Naze. Mr Smith had advertised
that it was let to Mr Fleck, who was described as being,

“ a most desirable tenant. ”

But Mr Fleck had been overdue with rent. Just after making the contract, but before transfer of
title, Mr Fleck went bankrupt. LHP refused to complete purchase. Mr Smith sought specific
performance, LHP sought rescission for misrepresentation. Asquith QC appeared for the
landlord.

Bowen LJ held there was a misrepresentation relied on by LHP. He held that statements of
opinions can often involve statements of facts, because, "if the facts are not equally known to
both sides, then a statement of opinion by the one who knows the facts best involves very often a
statement of a material fact, for he impliedly states that he knows facts which justify his
opinion."

Bowen LJ said with his opinion the landlord "avers that the facts peculiarly within his knowledge
are such as to render that opinion reasonable." And it "amounts at least to an assertion that
nothing has occurred in the relations between the landlords and the tenant which can be
considered to make the tenant an unsatisfactory one... In my opinion a tenant who has paid his
last quarter’s rent by driblets under pressure must be regarded as an undesirable tenant."

Same as Mr. smith Kingston sell Sam to Roman even knew that he is useless now a days so
misrepresentation occur in this scenario.

Lets go forward when Kingston enters into negotiations with Roman, the manager of Premier
FC. Kingston tells Roman that he considers “Sam is a star player, one of the best on the field. He
has feet like magic.” Here it relates to the case Bisset v Wilkinson [1927] AC 177

The plaintiff purchased from the defendant two blocks of land for the purpose of sheep farming.
During negotiations the defendant said that if the place was worked properly, it would carry
2,000 sheep. The plaintiff bought the place believing that it would carry 2,000 sheep. Both
parties were aware that the defendant had not carried on sheep-farming on the land. In an action
for misrepresentation, the trial judge said:

"In ordinary circumstances, any statement made by an owner who has been occupying his own
farm as to its carrying capacity would be regarded as a statement of fact. … This, however, is not
such a case. … In these circumstances … the defendants were not justified in regarding anything
said by the plaintiff as to the carrying capacity as being anything more than an expression of his
opinion on the subject."
The Privy Council concurred in this view of the matter, and therefore held that, in the absence of
fraud, the purchaser had no right to rescind the contract.

Here Kingston give his opinion to Roman about Sam and so Roman has no right to rescind a
contract.

As Roman asks his assistant manager, Terry, to watch him at the next game. Terry is busy that
weekend and doesn’t go. He tells Roman, however, that Sam is indeed a great player. In the case
Attwood v Small (1838) 6 CI & F 232 case also relating to this scenario in which The
purchasers of a mine were told exaggerated statements as to its earning capacity by the vendors.
The purchasers had these statements checked by their own expert agents, who in error reported
them as correct. The sale was complete the plaintiffs found the defendant's statement had been
inaccurate and they sought to rescind on the ground of misrepresentation. It was held in the
House of Lords that there was no misrepresentation, and that the purchaser did not rely on the
representations.

Here Roman verified the Kingston statement by his assistant manager ang due to this he has no
right to rescind the contract.

In the Roman’s second contract with Kingston, Kingston firstly gine the representation statement
but with the time passes and circumstances changed and it didn’t give the awareness about the
change to Roman the circumstances while signing a contract. In the case Spice Girls Ltd v
Aprilla World Service BV[2002], The claimants, the Spice Girls, entered into a contract with
the defendant motorcycle manufacturer under which the defendant agreed to sponsor the Spice
Girls’ tour in return for promotional work. The contract was signed on 6 May 1998. Geri
Halliwell left the band on 27 May that year. The defendant discovered that Halliwell informed
the other members of the group of her decision to leave prior to the signing of the contract. The
defendants claimed they had been induced to enter the contract by a misrepresentation. The
claimants denied misrepresentation.

It was held by the Court of Appeal that the Spice Girls had made a misrepresentation by conduct
in that all of the members participated in a commercial photo shoot, at considerable cost to the
defendants, at a time when they knew that one member was to leave. They also engaged in other
conduct, such as the supply of logos, images and designs, which included the five Spice Girls,
which also amounted to misrepresentation. In another case Esso Petroleum v Mardon [1976]
QB 801

Esso's experienced representative told Mardon that Esso estimated that the throughput of petrol
on a certain site would reach 200,000 gallons in the third year of operation and so persuaded
Mardon to enter into a tenancy agreement in April 1963 for three years. Mardon did all that
could be expected of him as tenant but the site was not good enough to achieve a throughput of
more than 60,000-70,000 gallons. Mardon lost money and was unable to pay for petrol supplied.
Esso claimed possession of the site and money due. Mardon claimed damages in respect of the
representation alleging that it amounted to (i) a warranty; and (ii) a negligent misrepresentation.

The Court of Appeal affirmed the finding of negligence under the principle of Hedley Byrne v
Heller (1964). On the issue of warranty, Lord Denning MR stated:

"… it was a forecast made by a party, Esso, who had special knowledge and skill. It was the
yardstick (the "e a c") by which they measured the worth of a filling station. They knew the facts.
They knew the traffic in the town. They knew the throughput of comparable stations. They had
much experience and expertise at their disposal. They were in a much better position than Mr
Mardon to make a forecast. It seems to me that if such a person makes a forecast -intending that
the other should act on it and he does act on it- it can well be interpreted as a warranty that the
forecast is sound and reliable in this sense that they made it with reasonable care and skill. … If
the forecast turned out to be an unsound forecast, such as no person of skill or experience should
have made, there is a breach of warranty."

So Roman has the right to rescind the contract because Kinston didn’t noticed him about change
in circumstances.

With the appointment of these two players Roman faces problem that, At the first game that Sam
plays, his lack of ability is responsible for the team conceding five goals. To make matters
worse, Perry’s injury in so severe that he is unable to play throughout the season. The chairman
of Premier FC is furious about Roman’s decision to appoint these two players and sacks him
from his £500,000 a year job. In addition, Nikedas, the famous sports brand, informs Roman that
he will no longer be required for their latest advertising campaign. This will lose Roman
£100,000 of additional income.

So I think that Roman’s case is strong he will receive the damages if he sue Kingston. As in the
case Whittington v Seale-Hayne Mr Whittington bred prize poultry. He bought a long farm
lease, induced by Seale-Hayne’s representation that the premises were sanitary and in good
repair. But the water supply was poisoned, Mr Whittington’s manager got very ill and the poultry
died. Under the lease, Mr Whittington had covenanted to carry out repairs required by the
council, and these were needed after the council declared the premises unfit for habitation and
the drains needed renewing. It was undisputed that Whittington was entitled to indemnity for
rates paid or repairs costs. Whittington sought rescission and indemnity for loss of poultry,
profits and medical expenses.

Farwell J held no further losses could be claimed because it was beyond the ambit of the
indemnity to which Mr Whittington was entitled. These losses did not result in a benefit to Seale.
Since the representation was non-fraudulent, there could be no damages and therefore no
compensation either. It was not the case that the rescinder should be in a position status quo ante
because ‘to make good by way of compensation for the consequences of the misrepresentations
is the same thing as asking for damages.’

In another case William Sindall plc v Cambridgeshire County Council William Sindall plc
agreed to buy land from Cambridgeshire County Council after they were told the council were
aware of no easements. But a private sewer from 20 years before was found after completion.
The important point was, however, that after William Sindall plc made the purchase the property
market crashed and the value of the land plummeted. William Sindall plc sued for rescission for
misrepresentation

Hoffmann LJ held there was no misrepresentation and no operative mistake. However, had it
been necessary for the exercise of discretion under s 2(2) he said that the three factors for
deciding what is ‘equitable’ are,

• the nature of the misrepresentation; here it was a £5m land sale, but the misrepresentation
would only cost £18k to put right
• loss caused were the contract upheld; this is a power to award damages where none were
previously recoverable. Because of s 2(3) this is not compensation for the loss, but
damages for the misrepresentation as such.
• taking into account that the loss of a bargain was £8m for the council and the ‘gross
disparity’ to the loss to Sindall plc he would have exercised his discretion and awarded
damages.

Hoffmann LJ said that section 2(1) is concerned with the ‘damage flowing from having entered
into the contract, while section 2(2) is concerned with damage caused by the property not being
what it was represented to be.’ The point of s 2(2) is to have a different effect to s 2(1), so that
representors are not unfairly oppressed when someone gets out of a bargain after a little
misrepresentation. In this case he would have exercised discretion under s 2(2) so as to prevent
William Sindall plc escaping from a bad bargain.

Evans LJ noted the loss would be very great to the Council because now the land was worth a
fraction of the purchase price plus interest, as well as it having to repeat the tendering process.