Misrepresentation

Statement:-
a) A statement could be a mere puff which has no liability, it is only asking
someone to enter into negotiations of the contract
b) A statement could be a representation.
c) A statement could be a term of the contract, which means that both parties
explicitly or impliedly agreed on then and if a term is breached then there
would be liability under contract law.
What is a representation?

● A representation is a statement which is not part of the contract, it is just a

statement of fact that induces the other party to enter into negotiations.
● If a representation is stated as false then there is no liability in the contract
law, but it has liability for misrepresentation under tort law.
Distinguishment between Representation and Term:-
● As mentioned above there are many differences between a term and a
representation. Both have different liabilities under different parts of the law.
● In written contracts, the statements mentioned are all terms and binding on
both parties.
● The issue arises in oral contracts where it is difficult to identify the difference
between a term and a representation.
● There are 4 main clues/ways to differentiate in such scenarios.
1) Timing of the statement = Routledge v McKay
● The general rule is that the longer the period when the
statement was made from the point of contract, the more likely it
is that it is not a term.
● However, it still could be a representation if it is established that
it plays a part in the inducement.
2) The expertise of the statement maker = Esso v Marden
● If the person making the statement is an expert in the discussion
then it is more likely that the statements he makes would be a
term of the contract.
● This is the rule in most cases but not in all.
● Similarly, if the statement maker is not an expert then it is more
likely that his statement would be representation.
3) Told to check for yourself = Ecay v Godfrey
● If the seller says that you do not need to verify it, then this is a
guarantee from the seller and this would be a term of the
contract
 ● However, if the seller says the product is fine but please make
sure to check it yourself or verify it yourself then this would be a
representation.
● It is important to note that if this statement is a representation
then it does not mean that the maker of the statement would not
be liable for anything.
● He could be liable under tort law under misrepresentation if the
statement is found to be false, just not under contract law.
4) Importance of the statement to the parties = Bannerman v White
● Another clue is to look at the importance of the statement to the
parties.
● If the buyer wants an assurance or a guarantee from the seller
regarding the product and the seller gives it, then this would be
a term of the contract
● Rather than a representation as it was not just made to induce
the other party.
● A representation if stated falsely or incorrectly then it is a misrepresentation
and the maker of the statement would be liable under tort law.

What is Misrepresentation?

● To find misrepresentation the statements made before the formation of the

contract are looked at.
● Misrepresentation could be defined as an “ Unambiguous false statement of
fact which induces a person to enter into a contract”
● Each part of this statement is required to be proved to prove the liability of
misrepresentation.
● The liability of misrepresentation has various remedies which range between
the contract, tort and rectification laws.
● The chapter on misrepresentation is divided into our parts, identification of
actionable misrepresentation, the categories of misrepresentation, the
remedies of misrepresentation and the exclusion of liabilities for
misrepresentation.
Breaking the definition down:-
● The misrepresentation definition could be divided into 5 parts which must be
proven to secure an actionable misrepresentation. It is especially important to
prove in the tort law.
1) Unambiguous
● The statement provided by the accused must be clear and
understandable.
● If the claimant wants to prove an actionable misrepresentation then
they are required to prove that the statement made to them was clear
and they understood it, and it should not be vague.
● The statement could not be a mere puff
 ● The case in which this rule was explained was the case of Dimmock v
Hallet ( 1886), where Tuner LJ held that the representation of land
being fertile and improbable was ambiguous and vague thus the
claimant would not be able to receive the remedy.
2) False
● To prove misrepresentation, the second ingredient is that the
representation should be false.
● The false representation could also be a half-truth or the truth which
changed.
● The first case in point is Dimmock v Hallet, where it was held that a
the agent telling the land was in use by the tenant was true at that time,
but the fact that he failed to mention they have been given the notice to
quit makes it a half-truth which is also a false representation.
● Similarly when at the time of representation, the statement made is true
however change in circumstances results in the statement becoming
untrue before the contract is signed. In such cases, if the representor
knew about the change and omitted it in silence, then in such cases it
would also be untrue. ( With v O’Flanagan [1936] and Spice Girls
Ltd v Aprilia World Service BV [2000] )
● In the case of With v O’Flanagan (1936), the medical practice being
profitable was true at the time the representation was made, however,
events occurred which caused the medical practice to be not profitable
at the time of the contract being signed. Here it was held that this
representation was false.
● Although normally in contract law there is generally no duty to care, the
buyer should be beware, however as this part of tort law thus in case of
silence or omission, there could be actionable misrepresentation.
● In both these cases, the justification was provided by the virtue of
continuing representation, when the change in circumstances occurred,
the representor was treated as making a false statement of fact
through omission of not mentioning the change and being silent.
● Look for half-truths or truths that are economically said and not the
literal truth.
3) Statement
● The general rule in English law is that there is no duty to disclose facts
based on the principle of caveat emptor.
● However as this area links with the tort law, with the establishment in
the recent case of Spice Girls v Aprilia (2002), it was held that silence
in situations where the circumstances are changed and the representor
knows about it, then he must communicate it or this could be an
actionable misrepresentation.
a) In the case of Spice Girls v Aprilia (2002),
 b) If a party knows about the change and knows that the other
party is working on assumed facts, and still they omit to tell.
Then this could be an actionable misrepresentation.
c) In this case, spice girls and Aprilla had a photoshoot and before
the signing of the sponsorship agreement, Aprilla sued for
misrepresentation by conduct.
d) Aprilla argued that the general assumption was that no one
would leave the group until the end of the contract.
e) However, the group knew one member was going to leave and
still omitted to mention it.
f) The courts found held as one member stated the intention to
leave the group they should have told Aprilla, which they omitted
thus this was an actionable misrepresentation.
● Similarly, another exception to the general rule is some contracts which
require utmost good faith. An example is the insurance contract. As
held in the case of Lambert v Co-operative Insurance Society Ltd
[1975], the court mentioned that the insurer would be entitled to a
remedy under misrepresentation if the information provided by the
defendant relating to the risk insured is not disclosed. It would not
matter if the insurer asked for the information or not.
● So if you are asked whether certain facts exist, then it is your duty to
disclose those facts to the insurer in utmost good faith. However such
situations and scenarios are very limited. ( Keates v Earl of Cadogan)
● The case of Yam Seng v International Trade mentions some
situations where there should be a duty to disclose, however, the case
of MSC v Cottonex Anstal states under English law no such duty
should arise except the insurance contracts.
4) Fact
● The general rule regarding this part is that the statement must be a
statement of fact; it cannot be a statement of your opinion. Your opinion
is your opinion and it would not be considered as a representation. An
invalid or wrong opinion could still be a valid statement of fact. ( Bisset
v Wilkinson ( 1927) )
a) Here it was held as neither party had knowledge about the
capacity of the sheep thus it would not be a misrepresentation.
● However, there is an exception to this rule:-
a) If the person making the statement is the professional/expert in
the field then it would not be his opinion but a statement of fact
which if made wrong then could cause actionable
misrepresentation.
b) The justification is provided that the expert would have prior
knowledge which supports, validates and forms his opinion.
 c) Thus his opinion on the subject could not be always wrong.
(Smith v Land House Corporation ( 1884) and Esso v
Mardon)
d)
● The general rule was that if a person misrepresents or falsely
represents his intention then he does make a false statement of fact
and thus he would be liable for misrepresentation as his state of mind
is a matter of fact. ( Edgington v Fitzmaurice)
● However, a statement of intention is not a statement of fact nor a
promise is a statement of fact in cases where the party actually and
truly holds that intention. Thus in such circumstances, a person who
does not carry out his stated intention would not be liable for
misrepresentation. ( Wales v Wadham).
● But this rule is confusing as the courts held that the intention of the
party at the time was true but it changed after the contract/ agreement
was made.
● However, in such a scenario, it could be argued that the rule of With v
O’Flanagan should be used and that the other party should have
mentioned the change in a reasonable time to avoid misrepresentation.
● Thus generally the rule of Edgington v Fitzmaurice would be used
that at the time of statement if the intention is not true then it would be
a misrepresentation.
● It is important to note that evidence must be provided that the intention
changed after the representation.
● Statement of law = Previously it was held in most cases that if a false
statement of law is made then it would not give rise to remedies of
misrepresentation
● However in the case of Kleinwort Benson Ltd v Lincoln City Council
[1999], the House of Lords recognised that a statement of law/ mistake
in law would give rise to remedies in misrepresentation.
● The high court in Pankhania v Hackney London Borough Council
[2002], stated that the same rule of Ediginton v Fitzmaurice would be
applied in the scenarios of false statements of law.
5) Inducement
● The last part and ingredient to prove misrepresentation is to establish
a link between the unambiguous false statement and the formation of
the contract.
● The claimant must prove that the representation was a reason he was
induced to form the contract.
● The claimant does not have to verify whether the statement made is
true or not. ( Redgrave v Hurd ). Here it was held that the claimant is
entitled to believe that the other person is saying the truth. This is the
general rule regarding verifying the truth.
 a) However, the obiter of Smith v Eric Bush, mentions that this is
not an absolute rule. In the case of commercial contracts or
contracts for valuable products such as houses, the buyer
should verify the product. It would be unreasonable for him to
buy the product without verifying.
b) If the party fails to do so unreasonably based on the facts then
there could be an issue of contributory negligence.
● The main issue arises when the party verifies the product and still it
turns out that there was a misrepresentation.
● The leading case for such a matter is Atwood v Small, where such
circumstances were discussed in detail.
● In such situations, the defendant could argue that it wasn’t his
statement which induced you but your verification that was the main
reason for entering into the contract.
● However, the claimant could counter argue as established in this case
that the statement should not be THE inducement but AN inducement.
Meaning that the statement should not be the main or the sole reason
for inducement but it only needs to be just an inducement. ((Edgington
v Fitzmaurice (1885) and now BV Nederlandse Industrie van
Eiprodukten v Rembrandt Enterprises [2019 )
Presumption from Courts regarding Inducement
● There is a presumption from courts regarding the inducement of the
claimant.
● The courts presumed that if A has made a misrepresentation and B
entered into the contract, then A induced B to enter into the contract
through misrepresentation.
● It is that if a reasonable person is induced by the statement in similar
facts then the claimant was also induced. In such situations, the
claimant does not have to prove the inducement unless it is rebutted. (
Museprime v Adhill.).
● However, this could be rebutted by the misrepresentation stating that
although a reasonable person was induced, the claimant in this
scenario wasn’t. Here the actual intention of the claimant is required to
be proved by the defendant with sufficient evidence. ( JEB Fasteners
v Marks Bloom.)
● Furthermore, if the claimant argues that although a reasonable person
in such a scenario and facts would not be induced, the claimant was.
This is to be proven with evidence and differentiated through facts of
the case.
● The courts use a part of the decision of Museprime v Adhill states
that if a reasonable person is induced by the false statement of the
misrepresentor then that would be a real and substantial inducement.
Rebutting the presumption regarding inducement.

● The Supreme Court in the case of Hayward v Zurich, have agreed

that the presumption of courts is very heavy and difficult to rebut.
● To rebut the presumption there are 4 possible ways and the
misrepresentation has to prove only one.
1) The representative was aware of the untruth in the
statement.
● This rule is to be followed strictly. The defendant could
not argue that the claimant had the opportunity to find the
untruth but he didn’t take it. ( Redgrave v Hurd and
Hayward v Zurich)
2) The representee relied upon some other inducement
● In a situation where the representee was not actually
induced by the misrepresentation, then the claim could be
rejected.
● There should be no causal link between the
Unambiguous false statement of fact and the inducement.
● If the main and sole reason for inducement is different
and not something the defendant is legally responsible
for, then the presumption would be rebutted.
● This was held in the case of Attwood v Small by the
House of Lords.
3) The representee was not aware of the misrepresentation
● If the representee is not aware of the fact that there has
been a misrepresentation or the misrepresentation was
never directed towards him then he could not be induced
thus, there would not be a liability for the
misrepresentation.
● This was established in the case of Horsfall v Thomas,
where the claim for misrepresentation for gun backfiring
was rejected due to the defendant arguing that the
claimant never tested or checked the gun thus he could
not be induced by the fault.
4) The representee would have entered into the contract
despite being aware of the untruth statement.
● The defendant here must prove that the claimant even if
he knew every fact and truth would have continued with
the contract then the presumption would be rebutted. (
Atlantic Lines & Navigation Co Inc v Hallam Ltd (The
Lucy) )
 ● Another justification for rebutting was provided in the
Court of Appeal case SK Shipping Europe v Capital
VLCC [2022], where the Court of Appeal further
enhanced the test stating that the question would be
“whether the claimant would have entered into the
contract on the same terms knowing about the
misrepresentation.
● Which in this case was held to be correct thus the court
stated that there was no inducement and thus no
actionable misrepresentation.

Categories of Misrepresentation.

● There are 4 main categories upon which the misrepersentor could be charged
for.
● It is important to consider that the categories are discussed after the
actionable misrepresentation is established and proven by the
misrepresentee.
1) Fraudulent
● This is the tort law of Deceit.
● Here the misrepresentee has the heavy burden of proof to establish
that the misrepresentor, either knew about the truth and lied regardless
or he never actually cared if the statement he is making is true or a lie.
( Derry v Peek ( 1889) )
● The claimant has to prove any one of the following to a charge against
the misrepresentor under fraudulent misrepresentation.
a) The misrepresentor knew the statement was untrue
b) The misrepresentor believed the statement was untrue
c) The misrepresentor was reckless with the statement and didn’t
care about its truth.
● In the actionable misrepresentation, the burden of proof is on the
misrepresentee to prove the misrepresentor actually made a
misrepresentation.
● If the misrepresentor is charged with fraudulent or Deceit
misrepresentation then he would also have the burden of proof to
prove fraud and this burden is a heavy one.
● There are different remedies for each, but it is quite difficult for the
claimant to prove misrepresentation under fraud.
2) Statutory Misrepresentation
● After the enactment of the Misrepresentation Act 1967, the claims
which are brought under the act have reversed the burden of proof as
compared to the fraudulent charge
 ● So if the misrepresentee brings a claim under statutory
misrepresentation then the heavy burden of proof would be on the
misrepresentor to prove that the false statement at the time was
actually true to him on reasonable grounds.
● This was seen in the case of Howard Marine v Ogden, where the
misrepresentor used Lloyd's Register to check the capacity of the
ship. The information was found to be wrong. However as the register
was known as the bible of the shipping trade and the misrepresentor
had reasonable ground to believe it, the courts held that this was
sufficient to meet the heavy burden of proof.
● With this example, it could be understood the basic difference of proof
and the level the misrepresentor have to take to meet such standard.
● In such circumstances, the misrepresentor argues that he made the
misrepresentation based on an honest but mistaken belief rather
intentionally, and thus could be correctly charged under negligent
misrepresentation. ( Foster v Action Aviation Ltd [2013] ), charged
under section 2.1 of the misrepresentation act 1967
●
3) Negligent Misrepresentation
● There are 2 types of negligent misrepresentation. One was stated
under statutory misrepresentation and the other was mentioned in
common law
1) Statutory negligent misrepresentation.
a) Section 2.1 Misrepresentation Act 1967 say that if a
charge for statutory misrepresentation is brought forward
and the misrepresentor can prove the heavy
b) the burden of proof that he made an honest but mistaken
belief
c) Then he would be charged under section 2.1 for negligent
misrepresentation.
2) Negligent misrepresentation/Negligent misstatement under
common law/tort law
● Here the main guidance is taken through the case of
Hedley Byrne v Heller [1964].
● It was held that if the misrepresentor owns a duty to care
to the misrepresentee he went against this duty of care
through the misrepresentation.
● As it is seen in contract law there is no duty to care
however as misrepresentation is linked with tort law, in
tort law to prove negligence a duty of care is required to
be established.
● The burden of proof is on the misrepresentee in such
scenarios.
 ● The requirements of a duty to care were mentioned in the
case of Caparo Industries Ltd v Dickman (1990),
a) The defendant must arguably have or profess
some kind of special skill regarding the subject
matter
b) It must be reasonable that the claimant would rely
on the statement by the defendant
c) The defendant should know or have foreseen that
the claimant would rely on his statement
d) The defendant should know that a transaction has
been made regarding the subject matter.
4) Innocent Misrepresentation
● If the misrepresentor fulfils the requirements for actionable
misrepresentation, but he truly believes that the statement he made
was true then he would be charged with innocent misrepresentation.
● Furthermore, another requirement is that the misrepresentation or’s
actions should not fall under the negligent misrepresentation. ( neither
the common law nor statutory )

Remedies for Misrepresentation

● After the correct category is proved for the misrepresentation then it must be
decided which remedies would be applied.
● The remedy of rescission is available for all types of misrepresentation.
● The remedies are the same for the category of fraud and misrepresentation
act. However, the key difference to be noted is that when charged with
fraudulent misrepresentation then the burden of proof is heavy on the
representee and the negligent misrepresentation is not included
● This is the opposite of the statutory misrepresentation charge.
● For fraudulent misrepresentation, the misrepresentee must prove the causal
connection but not the foreseeability.
● For negligent misrepresentation, it must be proven why the foreseeable type
is to be looked at.
● For innocent misrepresentation, the damages are based on indemnity bases
and not on the base of loss.
● The main remedy for misrepresentation is the remedy of damages.
● However, there is an additional remedy which is rescission, this makes the
parties go back to the situation where the parties were before the contract,
meaning all the exchange of subject matter and money would be returned.
● Like voiding a contract, but in this case, it would be voidable meaning that the
innocent party would have the choice to either void the contract or affirm it.
Recision:-

● Rescission is an equitable remedy in the common law.

● It could be used in all categories of misrepresentation, either if they are
fraudulent, negligent or innocent. The remedy of Rescission could be used.
● Rescission remedy if used would set aside the contract and make the parties
go to pre-contractual terms. In a similar word using Rescission means to void
a contract.
● It is to be noted that although Rescission is available, it must be asked for by
the misrepresentee in order to have an effect. The remedy does not
automatically applies.
● The remedy is an additional remedy meaning in the case where the liability of
the misrepresentation is proven, the misrepresentee could ask for the
damages as well as recession.
● Furthermore, it is essential to note that, to use the remedy of rescission the
misrepresentee must inform the misrepresentor and any other party which is
involved.
● However, an exception was stated in Car & Universal Finance Co v
Caldwell [1965], where it was found even sufficient steps to inform would
also be enough.
There are some situations where the remedy of recession is limited.
1) Affirmation
● If the misrepresentee knows about the misrepresentation of the other
party then he would not be able to use the remedy of recession. ( Long
v Loyd).
● In this case, the courts mentioned that once the claimant told the
defendant about the issues with the lorry and negotiated the price. As
soon as he paid the half price, he accepted the misrepresentation of
the defendant and the condition of the lorry. Thus he would not be
eligible for the remedy.
● There are 2 requirements/tests to prove affirmation mentioned in the
case of Peyman v Lanjani (1985), where the courts stated, to
constitute affirmation,
a) The misrepresentee must be aware of circumstances which
would result in his rights to reside being raised.
b) And that he is aware of the point when his rights have arisen.
2) Lapse of time
● Another situation where the rescission is not available is where there is
a significant time lapse between the identification of the
misrepresentation and the reporting of the misrepresentation. ( Leaf v
International Galleries [1950])
● Although in Leaf the time lapse was 5 years, it does not mean that a
shorter period could not be regarded as a lapse of time
 ● In the case of Salt v Stratstone Specialist Ltd [2015], it is stated that
the misrepresentee should immediately act as soon as he finds out
about the misrepresentation. This is based upon the principle that
delays defeat equity.
● There is no set time limit for the lapse but as rescission is a
discretionary remedy, the courts would decide to decide.
3) Impossibility of restitution
● The purpose of the rescission is to make the parties go back to the
pre-contractual situation, however, there are possibilities where
restitution is impossible. ( Clarke v Dickson (1858) )
● If the goods in question are perishable or consumed, then it would be
impossible for the courts to hold a recession and thus in such
circumstances, the recession would not be allowed.
● However, if the subject matter is only used and still available, just has
lost some value, then this would not prevent recession and the courts
could enforce recession, along with stating the misrepresentor pays for
the loss in value. ( (Erlanger v New Sombrero Phosphate Co [1878]
and Salt v Stratstone Specialist Ltd [2015] )
4) The intervention of a third party.
● These are such circumstances where after acquiring the goods, the
misrepresentor sells them to a third party.
● The courts in such cases state that as the title of the goods is passed
to the third party, they would not intervene.
● Due to this reason, the remedy of recession is not applicable in such
circumstances.
● To avoid this the misrepresentee sometime argue under the unilateral
mistake, trying to acquire the goods.

● Another possible situation is under Section 2 (2) of The Misrepresentation

Act 1967, where it is stated that the courts have the discretion to award
damages to the misrepresentee instead of recession in some circumstances.
● As this is an equitable remedy and not a right of the claimant and the courts
having the discretion, it is possible

Damages

● Just like all the other common law claims damages are provided to all the
claims for misrepresentation.
● However this was not always the case as previously the common law was
hesitant in providing damages against non-fraudulent misrepresentation, but
this changed with the enactment of the misrepresentation act 1967.
● The damages for innocent misrepresentation would be on indemnity bases
for necessary expenditure and not the general loss. ( Whittington v
Seale-Hayne (1900) )
Fraudulent/Deceit Misrepresentation:-

● For damages to be recovered for Fraudulent Misrepresentation, it would be

done so under the tort law of deceit.
● However, there were requirements mentioned in the case of Derry v Peek (
1889), which were to be fulfilled to be eligible for such a category. The
statement should be made by either:-
a) Knowing it was untrue
b) Genuinely believing it was untrue or
c) Doesn’t care about whether it is true or not.
● The damages under deceit are still available in tort law, but it is very difficult to
prove due to the heavy burden of proof on the misrepresentee, and they
usually opt to charge under statutory misrepresentation instead which is
regarded as a safer option.
Measures of Deceit:-
● To put in front a charge for deceit means that the claimant is arguing to put
him in a position where the misrepresentation was never made.
● It is important to note this is different from the position where the statement
was true.
● For example, a scenario of a business making a profit of $100,000 per year is
told by the misrepresentor to the claimant which was not true.
a) If misrepresentation is established and it is charged under deceit then it
would mean putting the claimant in the position where he was before
the contract, all the money he lost along the way and not the desired
profit the claimant wanted through the contract
b) This is different from saying putting the claimant in the position where
the statement was true, as it would be impossible for courts or the
misrepresentee to make the statement true.
● Generally, this scenario prevents the claimant from recovering lost profits,
however, this is not always the case as seen in East v Maurer.
a) Here the courts held that the claimant would be eligible for potential
profits as the business he bought turned out to be not as much profit
due to the direct cause of the misrepresentation
b) Had the misrepresentee never made such a statement the owner
would have invested somewhere else.
c) Although potential profits were recoverable the reduced profit due to
the other business opening was not recoverable.
● This all depends on the direct effect of the misrepresentation.
● Once the fraudulent misrepresentation is established all the losses directly
linked with the deceit are held to be recoverable. (Smith New Court Security
Limited(1997) )
 ● The rule of remoteness as in normal contracts of tort and contract would not
apply in such scenarios. ( Doyle v Olby)
● additional/aggravated damages could also be recovered by the in addition
claimant to other damages in some exceptional cases where the claimant can
prove the harms and damages inflicted on his feelings/ mental health. (
Archer v Brown )

Statutory misrepresentation:-
● Before the misrepresentation act 1967, there was only fraudulent, innocent
and negligent common law misrepresentation.
● Section 2.1 included a new statutory misrepresentation which had a similar
effect to the fraudulent misrepresentation while bringing the balance in the law
on the such subject matter. In courts, it was referred to as Negligent
misrepresentation
● The act said that the statement which will form the basis of deceit if made
fraudulently then would result in a similar liability of the defendant as the law
of deceit unless the defendant can prove that he genuinely believed the
statement to be true and believed it till the contract was made. ( Section 2.1
of the misrepresentation act)
● The inclusion of this act reversed the burden of proof to the defendant who
have to prove that he genuinely believed the statement was true and he have
to do this with more than the balance of proportionality.
● The 2 important things to consider while discussing negligent statutory
misrepresentation are the Burden of Proof and the Measure of damages.
Burden of Proof
● The claimant while suing under statutory misrepresentation ( section 2.1)
would have the burden of proof to prove the actionable misrepresentation
meaning that he had to prove that there was an unambiguous false statement
of fact which induced him to enter into the contract.
● Once they have done this then the burden of proof shifts to the
misrepresentor who now have to provide evidence with heavy burden that he
had reasonable ground to genuinely believe the truth of the statement.
● This could not be easy as there are only a handful of cases where the courts
actually accepted such an argument and the standards are really heavy.
1) Howard Marine and Dredging Co v Ogden and Sons (1978)
a) where the misrepresentor used Lloyd's Register to check the capacity
of the ship. The information was found to be wrong.
b) However, the register was known as the bible of the shipping trade and
the misrepresentor had reasonable grounds to believe it.
c) The courts held that this was sufficient to meet the heavy burden of
proof.
2) Al-Hasawi v Nottingham Forrest FC Ltd [2019]
● Here the issue was about the outstanding liabilities of the club.
 ● The defendant mentioned that he had reasonable ground to believe in
the statement regarding the outstanding liabilities as he acquired the
information from a relevant club officer.
● The court of appeal found that this was sufficient to settle the burden of
proof and thus he was charged with negligent misrepresentation rather
than deceit.

The measure of Damages:-

● The measure of damages under section 2.1 of the misrepresentation act is

the same for statutory misrepresentation as it is for fraud given that the
defendant does not provide a reasonable ground of belief. ( Royscot Trust
Ltd v Rogerson (1991).
● Thus if the charge under section 2(1) is proven this means that the
misrepresentor would be liable to all losses not simply the foreseeable losses.
● This way of interpreting and decision of Royscot was held to be controversial
by the House of Lords in the case of Smith New Court Securities Ltd v
Scrimgeour Vickers (Asset Management) Ltd [1997]. But to this date, the
decision still stands and has not been overruled.
● It was suggested that the damages for negligent misrepresentation under the
statute should be reduced as compared to fraudulent because of the
difference in proving each claim and issue of contributory negligence by the
misrepresentee ( Gran Gelato v Richcliff (Group) Ltd [1992] )
● However, the damages in the claim of deceit were not reduced when argued
by the misrepresentee in the case of Standard Chartered Bank v Pakistan
National Shipping (No 2) (2003)
Negligent misstatement:-
● In tort law, under the principle of Hedley Byrne v Heller (1964), the claimant
could argue economic loss due to the negligent misstatement made by the
defendant. This was confirmed in the case of Esso v Mardon.
● This is also referred to as negligent misrepresentation in common/tort
law.
● However, in such scenarios, the claimant is usually advised to charge under
section 2(1) which has an easier burden of proof and provides more
damages.
● There is one situation where such a principle could apply, it is the scenario
where the representation is not a statement of fact and is a statement of
opinion.
● Another scenario would be where Party B enter into a contract with Party C
based on the negligent misstatement of Party A.
● Here the burden of proof is on the misrepresentee
● This claim could only be used when the misrepresentor is not a party to the
contract.
 ● Damages for such misstatement are tortuous meaning that the main goal of
the courts in such a scenario would be to make the parties go back to the
pre-contractual position, and thus held damages in the process.
● The recovery is not as broadened as it is for fraudulent or negligent
misrepresentation as here only the damages which are foreseeable could be
recovered by the claimant.
● Such damages are not available under section 2 of the misrepresentation act
1967. ( Taberna Europe CDO II plc v Selskabet (formerly Roskilde Bank
A/S) (In Bankruptcy) [2016] )

Lieu of rescission:-

● Section 2 (2) of the misrepresentation act provides the court with another
possible remedy which they could use if the misrepresentee agrees to subset
the right of rescission.
● However, it is important to note that lieu of rescission could not be used when
there once was a right of rescission and it was removed or taken due to bars
of rescission. Meaning in a situation where, the misrepresentee knew about
misrepresentation, the lapse of time, the impossibility of restitution and the
intervention of a third party, damages could not be awarded under section
2(2). ( Salt v Stratstone Specialist Ltd [2015] )
● As to the number of damages, this is to be decided by the courts as this is
also a discretionary remedy and varies from situation to situation.
● However, in section 2 (3) the parliament have given clarity that the damages
provided under section 2 (2) should be less than the damages under section
2(1).
● This sub-section was given more clarity in its interpretation by the courts in
the case of William Sindall plc v Cambridgeshire County Council [1994],
where they stated this amount would be the difference between the amount
the claimant was misled to believe and the amount he received.
● In situations where the misrepresentation is more serious here, the courts
would be reluctant to use lieu of rescission and would recommend rescission
instead.
Innocent Misrepresentation:-
● There are no damages for wholly innocent misrepresentation where the
misrepresentor can prove that he genuinely believed that the statement was
true.
● However in a situation where there is innocent misrepresentation then the
misrepresents are liable for paying indemnity meaning only the necessary
expenditure while not the general losses. ( Whittington v Seale-Hayne
[1900])
● In the case of innocent misrepresentation, the remedy of rescission is
available, however, this could be excluded under section 2(2) of the
 misrepresentation act and instead, damages could be provided under Lieu of
rescission.
● In the case of William Sindall v Cambridgeshire CC [1994], Lord Hoffman
stated 3 requirements where section 2(2) could be used in innocent
misrepresentation.
a) Nature of the misrepresentation
b) The loss caused to misrepresentee if the contract is upheld.
c) The hardship is caused to the misrepresentor if the contract stays
intact.