Part 2. Misrepresentation.

The formation of a contract is often preceded by negotiations, in the course of which one party makes statements of fact intended to induce the other to enter into the contract. If any such statement is false, it is called a misrepresentation.

A misrepresentation, then, may be defined as a false statement of fact, made by one party to the contract to the other before the contract, with a view to inducing the other to enter into it. The statement must have been intended to be acted upon, and it must actually have induced the party to make the agreement.

It must be a representation of fact, not law. A mere boast is not regarded as a statement of fact (otherwise advertisers might incur substantial liabilities). A distinction is also made between a statement of fact and a mere expression of opinion, although this can prove difficult. Statements about a car such as ‘beautiful condition’ and ‘superb condition’ have been held in criminal cases to be statements of fact, not mere expressions of opinion.

The statements must be by one party to the contract to the other. A statement by the manufacturer which induces a customer to by from a rental shop will not give the customer any remedy for misrepresentation against either retailer or manufacturer.

The false statement must actually have deceived the other party and induced him to make the contract. Obviously it must be false, but even a misleading half-truth can be false.

In London Assurance v. Mansel (1879), a person seeking life assurance was asked on the proposal form what other proposals for cover he had made. He answered, truthfully, that he had made two proposals the previous year, both accepted. He did not mention, however, that he had also had several proposals rejected. This half-truth was held to be a misrepresentation. (See also non-disclosure)

Many misrepresentations also amount to promises which are actually incorporated into the contract. In this event, the party deceived will normally sue for breach of contract rather than for misrepresentation because, once breach of contract is proved, damages will automatically be awarded. Where mere misrepresentation is proved, the person liable may still have a defence to an action for damages if he can prove that he reasonably believed himself to be telling the truth. The distinction between mere representations and contractual promises can be difficult, but in contracts of sale the court will often hold that statements by a seller who is a dealer are contractual promises, whereas statements by a seller who is not a dealer are mere representations.

In Oscar Chess Ltd v. Williams (1957), the defendant was a private car owner, trading in his vehicle in part-exchange for another. He falsely stated that it was a 1948 model, whereas in fact it was a 1939 car. This statement was quite innocent, because the registration book had been falsified by a previous owner. It was held that his statement was a mere representa­tion, so that his innocence was a defence.

On the other hand, in Dick Bentley Productions Ltd v. Harold Smith (Motors) Ltd (1965), a dealer sold a car which appeared from the instruments to have travelled only 20000 miles. In fact it had done about 100 000. This was held to be breach of contract, not a mere misrepresentation, so that the buyer was automatically entitled to damages. A dealer, who knows more about the goods than his customers do, is readily assumed to promise that his statements are true.