Misrepresentation
Common Law Elements of Misrepresentation
In order for a misrepresentation to occur, the representee must show that the representor made:
 A false statement of past or existing fact;
 Addressed by one to another;
 Before or when the contract was made; and
 Which intended to induce, and in fact induced, the contract.
Statement of past or existing fact
In order for a false statement of past or existing fact to be made, a discrepancy between the facts as proven and the
statements made the representor must exist.
It is possible for conduct such as a nod or wink, or the shake of head or a smile intended to induce to form a
representation of act, particularly in response to a question: Walter v Morgan.
A statement of past and present fact must be distinguished from the following.
Statement of Future Intent
A representation about a person’s intention or a future state of affairs will generally not be a misrepresentation. For
a statement of future intention to have any effect, it must be a term of the contract or part of a collateral contract.
The exception is where the intention was never held, misrepresentation will occur: Edgington v Fitzmaurice
Statement of Opinion
A statement of opinion cannot amount to a misrepresentation unless:
 The representor does not hold a genuine belief in the opinion (fraud).
 The representor has no facts to support such a position: Fitzpatrick v Michael.
 It is unreasonable for the representor to hold the opinion based on their knowledge of the subject matter:
Bisset v Wilkinson
 The representor is in exclusive possession of the facts relevant to the opinion stated and, based upon those
facts, a reasonable person would not hold that opinion: Smith v Land & House Property Corporation.
Statement of Law
Generally a statement of law is not a misrepresentation. One can only ever express an opinion as to the law on an
issue until a court adjudicates on it.
However, the representor will still be liable where:
 The statement of law is made fraudulently, without belief in the truth of the statement: Public Trustee v
Taylor
 That statement of law is given in a situation where the representor owes the representee a duty of care to
ensure that any advice or information given is accurate, and it is reasonable for the representee to rely on it
(legal practitioner/client): Oudaille v Lawson
 It would be unconscionable in all the circumstances to allow the representee to escape liability, such as
where estoppel is found: L Shaddock & Associates v Council of the City of Paramatta.
Silence
Generally, mere silence cannot constitute misrepresentation. Three broad categories exist to displace this rule.
Half Truths
A half truth is a statement which, although it is literally true, creates a false impression in the mind of the
representee because other information is not disclosed: Arkwright v Newbold.
Where the information is deliberately withheld, or the representor has been reckless, the statement will be a
fraudulent misrepresentation: Jennings v Zihali-Kiss
If the representor owes a duty of care to the representee, and has been careless in not ascertaining the additional
information, there will be a negligent misrepresentation. However, if no duty of care is owed, and the representor is
not aware of the additional facts which make the statement false, a misrepresentation will not have occurred.
Statement that becomes false prior to contract
There is a duty to correct a false statement if the representor later discovers its falsity: Davies v London Marine
Insurance Company.
Fiduciary Relationship
Failure by one party, in a fiduciary relationship, to disclose all the material facts to the other will amount to a
misrepresentation: Tate v Williamson. A fiduciary relationship exists where a party is in a position of confidence or
influence over the other eg doctor and patient.
Uberrimae Fidei
Failure by the parties to disclose all material facts in contracts uberrimae fidel will amount to a misrepresentation.
Contracts uberrimae fidel usually involve one party being in possession of all the material facts and on this basis,
the law expects the party to disclose them ie the party must show utmost good faith eg contract of insurance.
Regard must be had to s 21 Insurance Contracts Act (Cth) 1984.
Addressed to the Representee by the other Party
The representation that induces the contract should be made by the other party to the contract or that party’s
authorized agent: Peek v Gurney. The representee will not be able to rescind a contract for a representation which
induces the representee to enter a contract with a third party.
At or before the time when the contract was made
The statement must be before or at the time of contract formation. A statement after the contract is formed could
not have induced that contract.
Which was intended to and did induce the representee to make the contract
Do determine whether the representee relied on the statement, it must be established that, first, the representor
intended the statement to induce the contract; and second, the representee was, in fact, induced because of the
statement by the representor.
Intention to Induce
It must be the intention of the representor to induce the representee into the contract. Generally, this is not an issue,
however, if the statement is made innocently and with no intention to induce the contract in circumstances where it
would be unreasonable for the representee to rely upon the statement, inducement will not have occurred eg Peek v
Gurney.
Reliance by the Representee
The representee must have been induced to enter into the contract as a result of the misrepresentation made by the
representor.
The rules of inducement were fully stated by Wilson J in Gould v Vaggelas:
1. Notwithstanding that a representation is both false and fraudulent, if the representee does not rely upon it he
has no case.
2. If a material representation is made which is calculated to induce the representee to enter into a contract and
that person in fact enters into a contract there arises a fair inference of fact that he was induced to do so by
the representation.
3. The inference may be rebutted, eg by showing that the representee, before he entered into the contract, either
was possessed of actual knowledge of the true facts and knew them to be true or alternatively, made it plain
that whether he knew the true facts or not he did not rely on the representation.
4. The representation need not be the sole inducement. It is sufficient so long as it play some part, even if only
minor, in contributing to the formation of the contract.
A person will be seen to have relied on a statement, despite the fact that they may have been able, with reasonable
diligence, to discover the falsity of the statement: Redgrave v Herd
Types of Misrepresentation
Innocent Misrepresentation
An innocent misrepresentation is one where the representor has neither been fraudulent nor negligent. The maker of
the statement honestly believes the statement to be true. To establish an innocent misrepresentation, the four
common law elements must be satisfied.
Remedies
The representee will normally be entitled to a remedy in equity for the misrepresentation, and be entitled to elect to
rescind the contract.
There is no common law right to damages for innocent misrepresentation: Redgrave v Hurd.
Fraudulent Misrepresentation
Fraud is proved when it is shown that, in addition to the four basic elements, a false representation has been made:
 knowingly; or
 without belief in its truth; or
 recklessly, careless whether it be true or false
with the intention that it should be acted upon by another party who is thereby induced to act upon it.
The test is subjective: Derry v Peek
Fraud embraces situations in which the representor lacked belief in the truth of the representation or made it
recklessly, not caring whether it be true or false: Gould v Vaggelas.
Remedies
The representee will normally be entitled to a remedy in equity for the misrepresentation, and be entitled to elect to
rescind the contract.
The representee will also be entitled to recover damages in tort (not in contract) for deceit in respect of the fraud
Negligent Misrepresentation
In order to prove negligent misrepresentation, the representee must prove the four common law elements of
misrepresentation and the three elements of negligence: Hedley Byrne v Heller.
1. The representor owed the representee a duty to take reasonable care that the statement made by the
representor was true and reliable;
2. that the representor breached such duty; and
3. the false representation led to the representee’s suffering loss or damage.
The Creation of a duty of care
A person to whom a negligent statement was made could recover damages in tort for losses caused to that person by
the negligence, if the person making the statement owed the other a duty by reason of a special relationship between
them: Hedley Byrne v Heller.
The special relationship will exist where a person gives information or advice to another upon a serious matter, in
circumstances where the speaker realises, or ought to realise, that he is being trusted to give the best of his
information or advice as a basis for action on the part of the other party and it is reasonable in the circumstances for
the other party to act on that information or advice: per Mason J in Shaddock relying on views of Barwick CJ in
MLC v Evatt.
It may not be reasonable to rely on information given casually on some social or informal occasion unless the advice
or information concerned a business or professional transaction and the representee makes clear the gravity of the
inquiry and the importance and influence attached to the answer.
The representor will be liable whether they volunteered the information with the intention of inducing the contract
or if the party sought the information: Sans Sebastion v Minister.
Remedies
The representee will normally be entitled to a remedy in equity for the misrepresentation, and be entitled to elect to
rescind the contract.
The representee will also be entitled to recover damages in tort (not in contract) for deceit in respect of the fraud