What is a Misrepresentation?
Distortion, fabrication, falsification, mutilation or adulteration of what is true. Colouration, slanting stretching, twisting or exaggerating reality.
We are subjected to misrepresentations from comedians to Disney, from beauty to dating sites. The issue in law is whether or not the false representation injured the party subject to the misrepresentation or falsehood.
Misrepresentations therefore, are a complete or partial false statement of fact made to another, which (whilst not being a term of the contract) induces the another to enter into a contract/arrangement.
Not all misrepresentation are actionable claims and part of the recipe is that the party who is subject to the misrepresentation is exposed to injury.
Wrongful Statement of Fact
An actionable misrepresentation must be a false statement of fact, not wrongful opinion; or future intention; or misinterpretation of law.
By way of explanation:
- A Statement of Opinion – We are all entitled to an opinion, therefore, a false/wrong statement of opinion is not a misrepresentation of fact. This principle was established in Bisset v Wilkinson  AC 177. That said, where the sales representative is giving a statement and he was in a position to know the truth or the true facts and it can be proved that he could not have reasonably held such a view, then his opinion can and should be treated as a statement of fact. This principle was outlined in Smith v Land & House Property Corp. (1884) 28 Ch D 7. That said, all litigants should understand that some expressions of opinion are merely sales puffery. That is to suggest for instance “if you fly xxx airline it will result in others considering you to be beautiful”. In Dimmock v Hallet (1866) 2 Ch App 21, the description of the land as ‘fertile and improvable’ was held not to constitute a misrepresentation.
- Statement as to the Future – A false statement made by a timeshare person as to what he will do in the future is not a misrepresentation and will not be binding on the represented unless the statement is incorporated into a timeshare contract.
However, if a person knows that his promise has induced another to enter into a contract and knows that the promise will not in fact be carried out, then the resort will be liable as expressed in Edgington v Fitzmaurice (1885) 29 Ch D 459 and Esso Petroleum v Mardon  QB 801.
False Statement of Law
A false statement as to the law is not an actionable misrepresentation. Each citizen in the UK is presumed to know the law as such a consumer should know the law and should have known the representation was false. This explained, the distinction between fact and the law is not simple and is discussed in Solle v Butcher  1 KB 671.
Generally it is difficult to establish silence as a misrepresentation. The consequence of the maxim caveat emptor is that the other party has no duty to disclose problems voluntarily. If therefore a timeshare consumer is labouring under a misapprehension there is no duty on the timeshare salesman to correct that misapprehension “buyer beware”. Smith v Hughes (1871) LR 6 QB 597.
However, there are three fundamental exceptions to this rule:
- Half-Truths – The timeshare salesmen must not misleadingly tell only part of the truth. In the event that a proclamation that does not present the whole truth the claim may be regarded as a misrepresentation. Nottingham Brick & Tile Co. v Butler (1889) 16 QBD 778.
- Statements that Become False – Where a statement was true when made out, but due to a change of circumstances, has become false by the time it is acted upon, there is a duty to disclose the truth. With v O’Flanagan  Ch 575.
- Contracts Uberrimae Fidei – Contracts uberrimae fidei (utmost good faith) impose a higher duty of disclosure of all material facts because timeshare representativse are in a strong position to know the truth. Examples would include finance contracts or loan agreements.
Where there is a fiduciary connection between say the parties to a contract, a duty of disclosure will arise, eg solicitor and client, bank manager and client, trustee and beneficiary, and inter-family agreements.
The false statement must have induced the consumer to enter into the contract. The requirements here are that the misrepresentation must be material and it must have been relied on by the consumer.
A measurable fact is something which would inspire a reasonable person in entering the contract. If one party fails to do this, the contract may be avoided. Lambert v Co-Operative Insurance Society  2 Lloyd’s Rep 485.
The misrepresentation must be material, in the sense that it would have tempted a reasonable person to enter into the contractual arrangement. However, this is not strictly objective:
- The consumer must have relied on the misrepresentation.
- There will be no reliance if the consumer was unaware of the misrepresentation. Horsfall v Thomas  1 H&C 90.
- There will be no reliance if the consumer did not rely on the misrepresentation but on his own judgment or investigations. Attwood v Small (1838) 6 CI & F 232.
Types of Misrepresentation
Once misrepresentation is established it will be necessary to ponder what type of misrepresentation has been made. There are three basic types of misrepresentation: fraudulent, negligent and wholly innocent. The importance of the distinction lies in the remedies available for each type.
This is defined by Lord Herschell inDerry v Peek (1889) 14 App Cas 337 as a false statement that is made
- without belief in its truth; or
- recklessly, careless as to whether it be true or false.
Therefore, if someone makes a statement which they honestly believe is true, then it cannot be fraudulent.
The burden of proof is on you the consumer – “he who asserts fraud must prove it”. Tactically, it may be difficult to prove fraud, in the light of Lord Herschell’s requirements.
The remedy is rescission and damages in the tort of deceit.
This is a false statement made by a person who had no reasonable grounds for believing it to be true. There are two possible ways to claim: either under common law or statute.
Negligent Misstatement at Common Law – The House of Lords has held that in certain circumstances damages may be recoverable in tort for negligent misstatement causing financial loss in Hedley Byrne v Heller  AC 465.
Success depends upon proof of a special relationship existing between the parties. Such a duty can arise in a purely commercial relationship where the timeshare salesman has (or purports to have) some special skill or knowledge and knows (or it is reasonable for them to assume) that you the consumer will rely on the representation. See Esso Petroleum v Mardon  and Williams v Natural Life Health Foods (1998) The Times, May 1.
The remedies are rescission and damages in the tort of negligence.
Section 2(1) of the Misrepresentation Act 1967 provides:“Where a person has entered into a contract after a misrepresentation has been made to them by another party thereto and as a result thereof they have suffered loss, then, if the person making the misrepresentation would be liable to damages in respect thereof had the misrepresentation been made fraudulently, that person shall be so liable notwithstanding that the misrepresentation was not made fraudulently unless they prove that they had reasonable ground to believe and did believe up to the time the contract was made that the facts represented were true.”
This provision does not require the consumer to establish a duty of care and reverses the burden of proof. Once a party has proved there has been a misrepresentation which induced them to enter into the contract, the person making the misrepresentation will be liable for damages unless they prove they had reasonable grounds to believe and did believe that the facts represented were true. This burden may be difficult to discharge as shown in Howard Marine & Dredging Co v Ogden & Sons  QB 574.
Wholly Innocent Misrepresentation
This is a false statement which the person makes honestly believing it to be true.
The remedy is either
- rescission with an indemnity, or
- damages in lieu of rescission under the court’s discretion in s2(2) Misrepresentation Act 1967.
Last modified: 23rd April 2020