Misrepresentation

A false pre-contractual statement of fact that induces contract formation gives the representee remedies that may unravel or adjust the bargain. Six cumulative elements must be proven: (1) an unambiguous false statement; (2) of existing fact, not opinion or future intention; (3) addressed to the claimant; (4) inducing entry into the contract; (5) causing loss; and (6) falling within one of three categories—fraudulent, negligent, or innocent. The classification determines available remedies: fraudulent misrepresentation (per Derry v Peek) enables rescission plus tort damages for all direct loss; negligent misrepresentation under s.2(1) MA 1967 reverses the burden of proof and awards damages 'as if' fraudulent; innocent misrepresentation permits rescission only, though courts may award damages in lieu under s.2(2). The doctrine protects consent by allowing representees to escape bargains induced by false information, while graduated remedies reflect degrees of culpability.

Derry v Peek (1889) 14 App Cas 337: Fraud requires proof that defendant knew the statement was false, had no belief in its truth, or was recklessly indifferent to truth. Created the gap between fraud and innocence that MA 1967 later filled.

Bisset v Wilkinson [1927] AC 177: Vendor's estimate of land capacity was opinion not fact where both parties knew he lacked expertise. Context determines whether statement is actionable fact or mere opinion.

Howard Marine v Ogden [1978] QB 574: Under s.2(1) MA 1967, defendant failed to discharge reversed burden despite relying on Lloyd's Register. Shows strictness of statutory test requiring proof of both reasonable grounds and actual belief.

Royscot Trust v Rogerson [1991] 2 QB 297: Section 2(1)'s fiction of fraud imports deceit's generous remoteness test—all direct loss flows regardless of foreseeability. Controversial literal interpretation creating anomaly where negligent representor faces greater liability than contract-breaker.

William Sindall v Cambridgeshire CC [1994] 1 WLR 1016: Courts will refuse rescission for trivial misrepresentation where claimant seeks escape from bad bargain. Section 2(2) damages are compensatory, reflecting difference in value attributable to misrepresentation alone.

Courts apply a sequential analysis. First, identify the statement—silence generally not actionable except for half-truths (Dimmock v Hallett), continuing representations (With v O'Flanagan), or contracts uberrimae fidei. Second, classify as fact or opinion using Bisset test: does representor have superior knowledge or expertise? Third, prove inducement—need not be sole cause (Edgington v Fitzmaurice) but must be operative factor; independent investigation breaks chain (Attwood v Small). Fourth, categorise the misrepresentation: if defendant cannot prove reasonable grounds and belief, s.2(1) applies with reversed burden. For remedies, rescission available for all types subject to bars (affirmation, lapse, impossibility of restitutio, third-party rights). Damages depend on classification: fraud gets Doyle v Olby measure; s.2(1) gets same per Royscot; innocents get s.2(2) discretionary award only.

Confusing representation with term: Pre-contractual statements induce formation; terms are promises within contract. Same statement can be both (Esso v Mardon) but analysis differs—terms give expectation damages without proving inducement.

Misunderstanding s.2(1) burden: Defendant must prove reasonable grounds AND actual belief. Students wrongly require claimant to prove negligence.

Overstating restitutio bar: Modern courts apply flexibly—substantial restoration suffices with monetary adjustments (Salt v Stratstone). Any change doesn't automatically bar rescission.

Conflating s.2(1) and s.2(2): Different measures—s.2(1) gives full tort damages on Royscot basis; s.2(2) gives modest compensation for difference in value. Remedies are mutually exclusive.