A Misrepresentation is a false statement made by one party to a contract that induces the other party to enter into a contract. In order to be actionable, the statement must not only be false but must act to induce the other party to enter the contract. It occurs where one party makes a false representation before or at the time of making the contract.
There are a number of essential elements that must be satisfied in order to claim a false statement to be actionable as a misrepresentation;
It must be a material fact and not an opinion. This means that the person making the statement must be sure about the implications of the statement he/she is making.
The statement must have been made before or at the time of contracting.
The onus is on the represented to prove that he/she entered into a contract basing on such a statement.
Actual and complete knowledge will defeat the represented’s claim.
SILENCE OR NON DISCLOSURE AND MISREPRESENTATION
Under the common law there is no obligation on a party to volunteer information in a contract that is not asked for hence silence is not misrepresentation. However there are certain exceptions to this rule and these include;
- Ubrimae i.e Contracts of good faith – Where a party is supposed to disclose all the necessary facts concerning the contracts. These include Insurance contracts, where an insured party did not reveal previous refusals to the insurance company yet this was clearly material to the contract.
- Fiduciary Contracts – Where a party holds a position of trust and power over the other party and that party in a higher position must therefore act for that other party’s benefit.
- Half Truths – Where a statement is true but does not reveal the whole truth which therefore makes the whole statement misleading.
- Change of circumstances – Where a statement is true when made, but due to a change of circumstances or a lapse of time it becomes false, there is a duty on the maker of the statement to correct for instance.
There are three types of misrepresentation and these include;
Innocent misrepresentation occurs when a person has reasonable grounds to believe that the statement is true but it turns out to be false. It is possible for a party to mislead the other in a contract without realizing that the representation he made was incorrect and the statement that is made induces the other to enter into the contract.
The harm suffered by the plaintiff in cases of innocent misrepresentation is the same as that in fraudulent or negligent misrepresentation. However, the law treats a person leniently for innocent misrepresentation. This is because the function of the law is to compensate the injured party, not to punish the defendant.
A fraudulent misrepresentation is one that is made knowing it to be untrue or made recklessly not caring whether it be true or false.
Therefore, it is not enough that the statement is false; the person who made it must have been aware of its untruthfulness or was negligent in finding out the actual facts.
The party suffering loss as a result of fraudulent misrepresentation can sue for damages under the tort of deceit. Inevitably, the method of assessing any damages awarded will be according to the tort measure that is, to put the aggrieved party in the position he would have been in if the contract had been performed.
Negligent misrepresentation is also referred to as negligent misstatement.
A misrepresentor is said to have made his/her statement negligently, he cannot escape liability for any damage that may have been suffered by the represented as a result of relying on it.
REMEDIES FOR MISREPRESENTATION
- Rescission – it is the act of setting aside a contract in order to put back the parties in their original position as though the contract had not been made. The injured party may rescind the contract by giving a notice to the represent however, it may not always be necessary. However recession is an equitable remedy awarded at the discretion of the court and the injured party may lose right to rescind in the following circumstances.
- Affirmation of the contract – The injured party may affirm the contract if with full knowledge of the misrepresentation and forfeit their right to rescind. They expressly state that they intend to continue with the contract or they do an act whose intention may be implied.
- Lapse of time lapse of time, if the injured party does not rescind within reasonable time, he/she loses his right. In fraudulent misrepresentation, time runs from when the fraud was or when it as discovered while in non-fraudulent misrepresentation, time runs from when the date of the contract and not the date of discovery of the misrepresentation
iii. Restituo integrum (Impossible); the injured party may lose the right to rescind if substantial restoration is impossible. It is however good to note that precise restoration is not required and the remedy is still available of substantial restoration is. It is only where the plaintiff has sustained loss by the inferiority of the subject matter or in substantial fall in value that he will desire to exert his power of rescission if mere detoriation of the subject matter negative the right to rescind, the doctrine of rescission would have become a vain
- Third party acquires rights; if a third party acquires a right to a property in good faith, and for value, the misrepresentee will lose the right to rescind. In addition the right to rescind the contract will be lost if the court exercises its discretion to award damages in lieu of rescission
- INDEMNITY- Indemnity is a money payment by the misrepresentor in respect of expenses necessarily created in complying with the terms of the contract and is different from damages. An order of rescission may be accompanied by the accompanied by the court ordering an indemnity.
- DAMAGES – In the case of negligent misrepresentation damages are available. Damages will only be awarded for loss that is foreseeable as a consequence of negligent misrepresentation
In cases of fraudulent misrepresentation a party can sue for damages in the tort of deceit.