Misrepresentation, Undue Influence and Duress

• Pages: 142-177

CHAPTER 9

MISREPRESENTATION, UNDUE INFLUENCE

AND DURESS

MISREPRESENTATION

Material statements made by the parties during negotiations leading up to a contract

may constitute either contractual terms or mere representations . A contractual term is a

statement by which the parties intend to be bound and which therefore forms part of

the agreement. A mere representation is a statement by which the parties did not

intend to be bound but which nonetheless induced the contract.

1

Defi nition of ‘representation’

A mere representation is a statement:

(a) of fact,

(b) made by one party to the other,

(c) during negotiations leading to a contract,

(d) which was intended to operate, and did operate, as an inducement to enter into

a contract, but

(e) which was not intended to be a binding contractual term.

If such a statement turns out to be false , there is misrepresentation

False statement of fact

A representation may be by words, which is the usual case, or by conduct. An

example of mirepresentation by words would be where D induces C to buy a boat

which he describes as a ‘2010 model’, when in fact it is a 2001 model (the statement

as to the date not being a term of the contract), or to purchase a ‘genuine Renaissance

Italian vase’, when in fact the vase is an imitation, manufactured two years ago in

Taiwan (the origin and date of the vase not being made a term of the contract). An

example of a misrepresentation by conduct would be where D, a rogue, enters C’s

shop dressed in a barrister’s wig and gown, in order to induce C to sell him goods

on credit. Another example of misrepresentation by conduct is to be found in Spice

Girls Ltd v Aprilia World Service BV . 2 Here, the ‘Spice Girls’, a fi ve- member pop group,

had entered into a contract with the defendants under which the defendants agreed

to sponsor the group’s tour in return for promotional work. Three weeks after

signing the contract, one of the Spice Girls, Gerry Halliwell, left the group. When

the defendants became aware that the other members of the group had known

prior to the signing of the contract, of Halliwell’s intention to leave they claimed that

they had been induced to enter into the contract by misrepresentation, and the

1 See pp 58–61, above.

2 [2002] EWCA 15.

Chapter 9: Misrepresentation, Undue Infl uence and Duress 143

English Court of Appeal upheld that contention. By participating in a costly commer-

cial photo shoot, and supplying logos, images and designs of the entire fi ve- member

group, at a time when they knew that one member of the group was about to leave,

the Spice Girls had made a misrepresentation by conduct which entitled the defend-

ants to rescission of the contract.

Silence is not misrepresentation

Generally, silence cannot amount to a representation, and the mere non- disclosure of

the truth is not misrepresentation. In contracts of sale, the maxim is caveat emptor (‘let

the buyer beware’), so that the seller, subject to any statutory duties under consumer

legislation,

3 is not bound to disclose defects in the quality in the land or goods he is

selling.

4 As Lord Campbell explained:

5

There being no fi duciary relation between vendor and purchaser in the negotiation, the

purchaser is not bound to disclose any fact exclusively within his knowledge which

might reasonably be expected to infl uence the price of the subject to be sold. Simple

reticence does not amount to legal fraud, however it may be viewed by moralists.

However, silence may constitute misrepresentation in the following cases:

(i) Where silence distorts a positive representation, for example where a vendor of

a building described the premises as ‘fully let’, but omitted to disclose to the

purchaser that the tenants had given notice to quit (‘a half truth may be as good

as a lie’);

6 and where a defendant, on accepting a dress for cleaning, stated that a

document required to be signed by the customer exempted the defendant from

liability for damage to beads and sequins, whereas in fact it exempted the

defendant from ‘any damage howsoever arising’.

7

(ii) Where a statement, though true when made, later becomes false, to the represen-

tor’s knowledge, and the representor fails to inform the representee of the change

of circumstances.

8

(iii) Where there is active concealment of a fact, for example where the seller covers

up defects in an article in order to mislead the buyer into believing that the article

is in a good condition

9

(iv) Where the contract is uberrimae fi dei (see pp 157–163, below).

Statements of opinion

A statement expressing the speaker’s opinion on a matter is not a statement of fact

and will generally not be treated as a representation. Thus, for example, in Bissett v

3 See pp 106–116, above.

4 Keates v Lord Cadogan (1851) 138 ER 234.

5 Walters v Morgan (1861) 45 ER 1056.

6 Dimmock v Hallett (1866) LR 2 Ch App 21.

7 Curtis v Chemical Cleaning and Dyeing Co [1951] 1 All ER 631.

8 With v O’Flanagan [1939] Ch 575. See also Davies v London and Provincial Marine Insurance Co (1878) 8

Ch D 469.

9 Horsfall v Thomas (1862) 158 ER 813.

144 Commonwealth Caribbean Contract Law

Wilkinson , 10 W entered into a contract to purchase land in New Zealand from B in

reliance upon B’s statement that he estimated the land ‘would carry two thousand

sheep’. The land had not previously been used for sheep farming by B or anyone

else. When B sued W for the balance of the purchase price, W counterclaimed for

rescission of the contract on the ground of misrepresentation. The Privy Council

held that B’s statement was merely one of opinion, honestly held, and that the claim

of misrepresentation failed. On the other hand, an opinion may be treated as a fraud-

ulent misrepresentation if it is proved that the representor had no such opinion,

since an expression of opinion will usually be based on facts and may imply that the

representor has knowledge of facts which would justify his opinion. In other words,

an expression of opinion may be treated as a statement of fact, especially where the

representor is in a better position than the representee to know the relevant facts. A

well- known example is Smith v Land and House Property Corporation , 11 where the

vendor of a hotel being sold at an auction stated in the auction particulars that the

hotel was ‘let to a most desirable tenant’, whereas in fact the tenant was much in

arrears with the rent. It was held that the ‘opinion’ stated about the tenant would be

treated as a statement of fact, since it constituted an assertion that nothing had tran-

spired in the course of the landlord/tenant relationship to justify regarding the

tenant as ‘undesirable’.

Statements of intention

A statement as to what the speaker intends to do in the future is not treated as a

representation and will not generally be actionable; but it may be actionable if the

representee can show that the representor had no such intention. Thus, for example,

where a company in its prospectus stated that money lent to the company would be

used to expand the business, whereas, as the directors well knew, it was to be used

to pay existing debts, the apparent statement of intention was regarded by the court

as a statement of fact and an actionable misrepresentation since, in the words of

Bowen LJ, ‘the state of a man’s mind is as much a fact as the state of his digestion’.

He went on to say:

12

It is true that it is very diffi cult to prove what the state of a man’s mind at a particular

time is, but if it can be ascertained, it is as much a fact as anything else. A misrepresenta-

tion as to the state of a man’s mind is, therefore, a statement of fact.

Mere ‘puffs’

Advertisements containing commendatory and exaggerated descriptions of prod-

ucts being offered for sale (such as the laundry detergent manufacturer that

10 [1927] AC 177. See also Economides v Commercial Union Assurance Co plc [1998] QB 587 (statement by

21-year- old student estimating cost of replacing contents of fl at at £16,000 held mere expression of

opinion and not actionable).

11 (1884) 28 Ch D 7.

12 Edgington v Fitzmaurice (1885) 29 Ch D 459, at 483.