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Misrepresentation Act Claim

Updated on October 1, 2010

Misrepresentation

1) What is the Misrepresentation Act?
It is an act enacted in 1967 which would apply to England and Wales, as well as any common law jurisdiction that chooses to also implement it into their legislation. The rationale for the Misrepresentation Act in English Contract Law, was to regulate cases of unjust enrichment and unfairness in conduct, that would come about from misrepresentations. However, just reading the act alone is insufficient to understand the common law concept of misrepresentation, as the act mainly makes only certain qualifications to existing common law body of misrepresentation. Even now it is still sometimes referred to as the Misrepresentation Act 1967.

2) Why would you ever need to know about it?
It may come at a point in your commercial or personal life where someone had lied to you, and that lie was meant or eventually led to you entering into a contract. That would have been a misrepresentation to you, and a successful claim for it would allow you to escape that cunning contract you were misled into, be it through what they said (oral contracts are hard to prove however), misrepresentation from an email or best of all a written declaration. Sometimes it happens when someone sells a house to you, and lies about whether they had a roof that would soon collapse or something similar. At other times it might be a pricey piece of equipment that someone had assured you was brand new or had a full warranty. At those times, the costs that you would soon face are pressing enough that you would begin to consider litigating for damages or rescission. Knowing about misrepresentations and claims available would help your understanding of your legal position.

3) How much easier is it?
Previously, it was much harder to claim under the doctrine of misrepresentation. For one, the remedies were limited, and usually unless you could prove fraud you were generally restricted to getting your money back, which would be wholly inadequate if you had suffered major economic losses, or sharp damages with the lie as its cause. Under Derry v Peek, it was practically difficult to prove fraudulent misconduct or fraudulent inducement. With the misrepresentation act, the onus was moved to the defendant to prove his innocence instead of you having to prove that he was negligent or otherwise. After establishing negligence, through the absence of proving otherwise, you can then sue for up til the extent that you could if fraud was proved.

4) Elements
(i) A statement of fact that was false
(ii) Was directed at the person who is about to sue
(iii) And it can be proved that the statement had induced said person into contracting
Half truths, distortion of truths, as well as actionable omissions easily fall into the (i) category. Opinions and statements about the future are more iffy however, and a fine line draws the distinction, so take care. Also, it is best if the misrepresentation is made first hand, indirect misrepresentation falls quickly into contentious territory.

5) Types
Innocent
This happens occasionally, when both parties are totally unaware of the latent flaws. Here, the only thing to do would be to get a refund back, as much as possible.

Negligent
The most common kind. It is up to the defendant to prove he did not have special knowledge or skill, or a duty of care to the suing party. Usually comes about when the person makes a statement carelessly.

Fraudulent
What is fraudulent misrepresentation? Here someone had clear intention to deceive, usually hard to prove. These days often irrelevant.

6) Caution
One thing to bear in mind is that english law may well not be your law. Take care before initiating any action. Seek proper legal counsel as is appropriate to your state. But if there is a cause of action available to you, amongst the legal remedies, you would likely be able to get damages or at least damages in lieu of rescission if relevant to your situation.

Mistake bears many similarities with a certain form of misrepresentation, namely innocent misrepresentation. But still do take some care in noting that indirect comments can still be negligent misrepresentation or if done with certain elements and comments can amount to fraudulent inducements. How misleading an indirect prodding is is of course subject to the unique factual matrix of each scenario. Not everything is 100% sure and things will of course change depending on times and new cases being decided upon.

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