Pre-contractual statements and
misrepresentation
It is possible to view pre-contractual statements in
more than one light:
• if the statement is PROMISSORY in nature it
may be held to be part of the final contract – and
be incorporated as a term of the contract
• if the statement is not promissory in nature then it
is unlikely to be regarded as a term of the
contract, rather just a REPRESENTATION OF
FACT
Some basic preliminary
terms
Void
Voidable
Unenforceable
Pre-contractual statements can
be classified into one of 3 groups:
i. Mere ‘puffs’ of sales talk – for instance, a
phrase such as, ‘you won’t regret buying this
stereo from me’. Such phrases have NO
LEGAL EFFECT – but are seen as sales talk.
ii. Representations – statements of fact made
prior to the contract that do not become terms
of the contract
iii.Terms – statements made prior to the
contract that are held to be actual terms of
the contract
Why it is important to decide if a
pre-contractual statement is a
term or representation
Whether a pre-contractual statement is
regarded as a mere representation or a
term is significant in relation to any
damages that might be payable to the
wronged party and the wronged party’s
ability to set the contract aside.
Term or misrepresentation?
The courts make use of various guidelines
in an attempt to work out what was the
INTENTION of the person making the
statement – and they do this
OBJECTIVELY. If they consider the person
making the statement intended to bind
himself in the future by his statement, then
this element of ‘futurity’ is likely to
encourage the courts to see the statement
as being a term of the final contract.
Verifying the truth of a
statement
Schawel v Reade 1913
Ecay v Godfrey 1947
Importance of the
statement
Couchman v Hill 1947
Specialist knowledge
Dick Bentley Productions Ltd v Harold
Smith (Motors) Ltd 1965
Oscar Chess Ltd v Williams 1957
Parole evidence rule
Routledge v McKay 1954
Definition of representation
• A representation is nicely defined in Cheshire,
Fifoot and Furmston’s Law of Contract 14th
edition at page 293 as:12
• ‘a statement of fact made by one party (the
representor) to the other (the representee) which,
while not forming a term of the contract, is yet
one of the reasons that induces the representee
to enter into the contract’.
• A MISrepresentation is simply a representation
that is UNTRUE.
Key Cases
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McInery v Lloyd’s Bank ltd 1974
Gordon v Sellico 1986
Spice Girls Ltd v Aprilia World Service BV 2000
Keates v The Earl of Cadogan 1851
Dimmock v Hallett 1866
Bisset v Wilkinson 1927
Smith v Land & House Property Corp 1885
Esso Petroleum Co Ltd v Mardon 1976.
Edgington v Fitzmaurice 1885
Solle v Butcher 1950
Horsfall v Thomas 1862
Museprime Properties Ltd v Adhill Properties Ltd 1990
Attwood v Small 1838
Redgrave v Hurd 1881
McInery v Lloyd’s Bank Ltd 1974
- a representation will not be actionable just
because the representee interprets it as
being false – it will only be actionable if on a
‘reasonable’ interpretation the statement,
which can be by words or conduct, could be
interpreted as being false, an objective test.
Gordon v Sellico 1986
This case therefore shows that ‘conduct’ can
amount to a misrepresentation
Spice Girls Ltd v Aprilia World
Service BV 2000
The Court of Appeal held that liability under
section 2 (1) of the Misrepresentation Act 1967
depended on four elements:
a) a misrepresentation made by one person to
another;
b) a subsequent contract between them;
c) consequential loss and
d) an absence, at the time the contract was
made, of a belief or reasonable grounds for
belief in the truth of the facts represented.
Points from Spice Girls
case
• The false statement of fact can be by
conduct as well as words
• the false statement of fact must be
material
• the Misrepresentation Act 1967 only
applies when the parties have made a
contract
• the onus of proof is reversed
Keates v The Earl of
Cadogan 1851
This case is generally cited as authority
for the fact that there is NO GENERAL
RULE OF DISCLOSURE – which
means that you do not have to tell the
other party things that would affect his
decision to contract.
Dimmock v Hallett 1866
Demonstrates 2 points:
• ‘fertile and improvable’ as a statement
was mere sales talk
• ‘was lately in the occupation of ….’ was
a half truth and amounted to a false
representation that induced the
purchaser to buy the farm
Beliefs and opinions
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Are not normally actionable but may be if the
person stating them does not genuinely hold
that opinion or belief - Bisset v Wilkinson
1927 - one has to take account of:
the material facts
the knowledge of each party
their relative positions
the actual words used
and the actual condition of the subject matter
The topic of misrepresentation will be
continued in the next lecture.