The concept of misrepresentation is concerned with pre-contractual statements that induce a contract but turn out to be false. There may be contractual remedies for some false statements of this kind, perhaps through a collateral contract, but a claimant will often wish to rely on the remedies for misrepresentation. The following issues are important in deciding if remedies are available on this basis (and, if so, which remedies):
Definition. Broadly an actionable misrepresentation must be:
made by one party to the other;
a statement of existing fact or law;
generally in the form of a positive statement, rather than silence. There are, however, a number of exceptions to this principle, for example when 282circumstances change between the making of the statement and the making of the contract;
something that in part, at least, induces the other party to make the contract.
Remedies for misrepresentation:
Rescission of the contract. This is the main remedy that is available for all types of misrepresentation, even if wholly innocent. Certain bars, such as lapse of time, or the intervention of third party rights, will prevent rescission being available.
Damages at common law. Damages are only available at common law if the maker of the statement has acted fraudulently, or been negligent in one of the situations where there is a duty of care (under the Hedley Byrne v Heller principle).
Damages under the Misrepresentation Act 1967, s 2(1). This is the most powerful remedy available, providing damages unless the maker of the misrepresentation can prove that there were reasonable grounds for him or her to believe in the truth of the statement.
Exclusion of liability for misrepresentation:
Exclusion of liability is governed by s 3 of the Misrepresentation Act 1967, which requires such clauses to satisfy the ‘requirement of reasonableness’.
‘Entire agreement’ clauses may prevent contractual liability for pre-contractual statements but may not circumvent s 3 of the 1967 Act.