H418/04 - Misrepresentation
A contract can be formed through a misleading statement rather than a freely informed choice. Learn to establish misrepresentation, distinguish the liability routes and select remedies subject to their actual conditions and bars.
False statement and inducement
A misrepresentation is a false statement of fact or law made to the other party which induces them to enter a contract. It can be communicated through words or conduct. The contract is normally voidable, meaning valid unless the entitled party successfully avoids it, rather than automatically void. The statement need not be a contractual promise; where it is also a term, contractual remedies may overlap without permitting double recovery.
First identify precisely what was represented and why it was false at the relevant time. A genuine opinion or prediction is not ordinarily a statement of existing fact. But an opinion may imply that the speaker has a factual basis which they do not have; an expert's apparent assessment can differ from an honestly qualified guess. A statement of future intention may misrepresent the speaker's present intention if they never intended to do it. Failure to perform later is evidence to investigate, not conclusive proof that the original promise was dishonest. Vague sales praise is usually insufficient.
Then establish inducement: the statement must actually influence the decision, though it need not be the only reason. A buyer who never heard it, knew the truth, or relied exclusively on their own independent investigation cannot simply assert reliance. In Redgrave v Hurd (1881) the opportunity to inspect financial papers did not by itself defeat reliance on a false income statement. An opportunity to check differs from choosing to rely on a check actually made.
Original application: a business seller says a machine has completed 200 hours of use, when records show 2,000. A buyer who selects it because they want light use has a clear false factual statement and reliance argument. If the buyer already knows the true hours and buys solely for spare parts, the statement did not induce that decision. The seller's honesty affects the later liability category; it does not turn a false statement true.
Silence and consumer omissions
Ordinary contracting has no general duty to disclose every disadvantage. Pure silence is therefore not automatically common-law misrepresentation. However, an apparently true statement can become false through a half-truth, concealment or an uncorrected material change. In With v O'Flanagan (1936) an initially accurate statement about a medical practice's income became misleading when illness caused takings to fall substantially before agreement. The continuing statement needed correction. The legal problem was allowing the earlier assurance to remain misleading, not imposing an unlimited duty to volunteer every fact.
Consumers receive additional statutory protection. For commercial practices from 6 April 2025, Part 4 Chapter 1 of the Digital Markets, Competition and Consumers Act 2024 (DMCC Act) replaced the main unfair-trading prohibitions previously in the Consumer Protection from Unfair Trading Regulations 2008. Under s227, misleading omissions include omitting material information needed for an informed transactional decision, legally required information, or non-obvious commercial intent. Unclear, hidden or untimely information can count as omitted. For this general misleading-omission route, s225 also requires likely influence on the average consumer to take a transactional decision they would not otherwise take; communication limitations and steps to overcome them matter. Section 230 separately addresses required information in an invitation to purchase, including the total unavoidable price.
Original application: a trader advertises a leisure course at £90 but hides a compulsory £40 booking fee until late in purchase. Omitting unavoidable pricing information can violate the statutory invitation-to-purchase rules; a materially misleading omission may also affect consumer decisions. This is different from a commercial buyer who receives no assurance about a machine's resale value and merely regrets not asking.
Do not convert every statutory omission into automatic common-law rescission or damages. Consumer enforcement and private contract remedies have different conditions. The earlier CPUTR Part 4A private-redress rules remain relevant during the statutory transition; they concern specified misleading actions and aggressive practices, not a general private remedy for pure misleading omissions. Where that redress right exists, Misrepresentation Act s2(4) prevents a duplicate s2 damages route for the same conduct. Identify the precise remedy rather than infer it from “unfair”.
Fraud and negligent misstatement
Fraudulent misrepresentation involves a false representation made knowingly, without honest belief in its truth, or recklessly without caring whether it is true. Derry v Peek (1889) establishes that test. The directors genuinely believed the necessary official permission for their claimed tramway power would be obtained; carelessness alone did not establish fraud. An unreasonable belief can help show dishonesty, but fraud is not proved merely by showing the speaker ought to have checked.
Fraud permits a claim in the tort of deceit where the statement was intended to be acted upon, actually relied on and caused loss. Damages aim to restore the claimant to the position without the induced transaction. Smith New Court Securities v Scrimgeour Vickers (1997) supports recovery of loss directly flowing from the fraud, even if not reasonably foreseeable. Actual causation, credits for value received and mitigation still matter: “fraud” does not make every later financial problem recoverable. Rescission may also be available subject to its bars.
Negligent misstatement at common law is a distinct tort route. Hedley Byrne v Heller (1964) recognises liability for careless statements causing economic loss where there is an appropriate special relationship or assumption of responsibility and reasonable reliance. The bank's disclaimer prevented liability on the actual facts. A claimant must establish duty, breach, causation and recoverable loss; damages generally require foreseeable kinds of loss within the duty's scope. This route can concern an adviser who is not a party to the resulting contract, unlike Misrepresentation Act s2(1). It does not by itself permit rescission of a contract with an innocent third party.
Original comparison: an accountant specifically accepts responsibility for a valuation to be used by a named buyer, carelessly ignores obvious relevant records, and the buyer reasonably relies on it. The tort route may apply even if the seller did not make that statement. If the seller knowingly invents the valuation, deceit may instead arise. An informal remark from a stranger does not automatically create an advisory duty.
Continue this lesson.
You’re previewing NovaLearn without an account. Create a free account to read the rest.
Create free account