BUSINESS LAW

Business Law



Business Law

Introduction

Misrepresentation in English law is an area of English contract law, which allows a person to escape a contractual obligation or claim compensation for losses. If one person can show that she entered an agreement because of another person's false assurances, then the other person will be unable to enforce the agreement against her, and may have to pay her damages. A misrepresentation can be an outright lie (fraud), an unintentional but careless falsehood (negligence), or an innocent slip of the tongue. In most cases English law allows escape from the bargain when a misrepresentation was made, because it holds that people should only assume contractual obligations when they have given their true consent.

When a misrepresentation has been made and an agreement was (or at any rate appeared to be) concluded, the misrepresentee (the one told the lie, falsehood, etc.) does not have to bring a halt to the deal. Misrepresentations generally do not render a contract void, as does the contractual doctrine of common mistake or frustration. It merely means that a contract will be voidable at the option of the misrepresentee. This is because not all contracts entered into on the strength of misrepresentations will always be bad, and it is thought more just to give the wronged party the choice about how to proceed.

Remedies are partly regulated by the Misrepresentation Act 1967. English law generally allows a contract to be unwound, so that both parties are put back into the position before the agreement was made. It may be that the misrepresentation was incorporated into the contract as a term, so as an alternative one can claim the contract should subsist and claim for a loss in expectations. In this case the misrepresentee can equally sue for damages as if the misrepresentation had been true. A misrepresentee may also sue for any losses which resulted from her relying on the misrepresentation.

Misrepresentation

A misrepresentation is a false statement of fact or law that is relied on by the other party in entering a contract. For example in Curtis v Chemical Cleaning and Dyeing Co[[1951] 1 KB 805] Ms Curtis took a wedding dress with beads and sequins to the cleaners. They gave her a contract to sign and she asked the assistant what it was. The assistant said it was to stop risk to the beads. In fact the contract exempted all liability. The dress was stained. But the exclusion was ineffective because of the assistant's misrepresentation.

The law does not say that "mere puff" or "sales talk" are misrepresentations. For example, a second hand car dealer claiming "this is the fastest car ever", or a washing detergent company advertising that their product will clean your clothes "whiter than white" do not count. This is because a reasonable person would be unlikely to take such claims seriously.[ Smith v Hughes (1871) LR 6 QB 597]

There are two essential steps in claiming a remedy for misrepresentation. The first is to show that a misrepresentation took place, and the ...