Misrepresentation in Contract Law: Case Analysis & Legal Rights

Figure 1: Contract Law

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Key Ingredients of the misrepresentation

In the given case study, Cynthia must prove certain aspects which are mentioned below to make a claim against the misrepresentation which are:

• False report or statement:False statement is considered as a statement which is misleading or incorrect. In the given case study, the statement given by Jatinder about the actual number of customers is evidently false because the actual number of the customers of shop was 300. As the first statement of Jatinder (license to print money) was a substantive opinion and the second statement of the Jatinder (moving to dubai) was true while Jatinder gave statement but it changed later. To prove misrepresentation, Cynthia must prove that the statement used by Jatinder is untrue.
• Facts: The false statement used by Jatinder must be on the basis of the facts rather than future intention or opinion. In the given case study, first statement is an opinion not a fact. Generally, courts do not treat opinions like an actionable misrepresentation. The second statement of Jatinder concern about the future intention. Later, Jatinder changed his mind due to which he did not performed his statement which was true when it was made. The future intention can alter which does not mean that it is considered as misrepresentation. Lastly, the third statement of Jatinder is an existing face which was falsely stated by Jatinder.
• Inducement: The false statement used must have convinced party to sign a contract with them. In the given case scenario, Cynthia fully have faith in on the statement related to the actual number of customers at the time of deciding to purchase the restaurant. The reliance of Cynthia on the statement of Jatinder can be measured reasonable, mainly if Jatinder offered figures at the time of negotiations.

 

Figure 2: Elements of Misrepresentation

Types of Misrepresentation

There are 3 main kinds of misrepresentation which are:

Negligent misrepresentation: The negligent misrepresentation occurs while the false statement used by the person is made very carelessly without having any sensible grounds for believing such statement to be true. In the case of Howard Marine & Dredging Co Ltd v. An Ogden & Sons Ltd (1978), the highlighter cannot simply escape liability by evidencing that he was not acting negligently however he must prove that he has significant grounds to believe that such statement is true . For this misrepresentation, Cynthia is responsible to prove that Jatinder did not take care about the statement’s truthfulness:

• Damages: In the given case scenario, Cynthia could entitle to claim damages and rescission under the Misrepresentation Act of 1967.
• Reasonable care: In the given case scenario, if Jatinder failed negligently to identify the actual number of customers and also given statement without any reasonable base for trusting it to be factual, it would be considered as negligent misrepresentation.

Fraudulent misrepresentation: This misrepresentation was stated in the case of Derry v. Peek (1889) that this misrepresentation occurs while the false statement or record is made perceptively, or recklessly, or without faith in its fact. For this misrepresentation in the given case scenario, Cynthia must give evidence to prove that Jatinder knew that his statement was reckless or was false as to is it was false or true:

• Damages: In the given case study, Cynthia could seek damages and rescission and such damages includes loss which was suffered to her because of the contract formation.
• Intent: In the given scenario, Jatinder know about the actual number of regular customers of the shop but stated false number which would be considered as a fraudulent misrepresentation.

Innocent Misrepresentation: This misrepresentation happens while the false statement is given by a person honestly along with reasonable facts for trusting it to be true. The claim for the innocent misrepresentation is very much limited as it will only arise while an entitlement for the negligent misrepresentation has failed under the Misrepresentation Act of 1967.

For the innocent misrepresentation, in this given scenario, Jatinder must have honestly made a false statement along with the sensible grounds for trusting it to be factual or true:

• Rescission: In the given scenario, Cynthia could claim for the rescission but she would only be awarded with the damages in lieu of recession when there is no possibility of the recession.
• Honest Mistake: Genuinely, if Jatinder believed that there were approx. 600 customers who are regularly visit his shop and had some reasonable grounds or base for such belief then it would be considered like an innocent misrepresentation.

 

Figure 3: Types of Misrepresentation

Analysis of the different statements which are been given by Jatinder in the given case study.

“The business is a license to print money”

This statement is considered as a sales puffery or opinion rather than taken as a statement of the facts. Such statement would be challenging while claim for misrepresentation on the basis of this statement as it is not an objective face, it is of subjective nature.

“I am selling the business because I intend to move to Dubai”

While given this statement, the intention of the Jatinder was genuine related to move to Dubai and this is the fact that changed in his mind related to the moving does not act like a misrepresentation. The future intention of an individual can alter or change and does not showcase dishonesty of an individual which giving statement.

“I have over 600 regular customers on my books”

This statement of Jatinder is a factual statement as Jatinder was given the false statement related to the actual number of the customers.

Remedies against the misrepresentation

• Remedies for fraudulent misrepresentation:In the given case scenario, Cynthia could look for recession or cancellation of the contract as well as Cynthia could also claim damages for the losses which she suffered due to the contract formation with Jatinder under the Misrepresentation Act of 1967 .
• Remedies for negligent misrepresentation:Under Misrepresentation Act of 1967, Cynthia could seek damages and recession as Cynthia would require to highlights that while given the statement Jatinder did not made efforts to ensure the truthfulness of the statement.
• Remedies for the innocent misrepresentation: In this given scenario, Cynthia could seek cancellation of contract or recession and she would only be awarded with the damages in lieu of recession when there is no possibility of the recession.

Therefore, Cynthia has a claim for the act of misrepresentation, on the basis of false statement on the number of constant clients of the restaurant. This misrepresentation done by Jatinder could be either innocent or negligent which is based on whether Jatinder had rational grounds for considering his statement to be factual.

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Legal advice to Cynthia

As per the overall analysis, Cynthia should pursue this legal advice to identify the strength of her claim for misrepresentation and should also determine appropriate course of actions to seek remedy .  Firstly, Cynthia should take legal advice from a legal expert which can help in seeking remedies. There is some advice which help in gathering evidences, identifying misrepresentation and also in pursuing remedies like damages and rescission.

To seek remedies, Cynthia should collect all the relevant witness statements, communication and relevant documents which assist her in claiming damages and recession for misrepresentation. This involves:

Witness statement: In the given case scenario, Cynthia should gather all the witnesses who were there at the tie of discussions and negotiation can corroborate the claims of Cynthia. She should obtain and assess the statements from every witness which helps in claiming damages.

Communication: Cynthia should collect or gather messages, emails and many other ways of communications which was done between Jatinder and Cynthia. Such communications can offer an evidence or prove of the statements which were given by Jatinder at the time of discussion on which Cynthia was wholly relied.

Sales contracts: The sales contract is considered as a relevant document which examines for any warrantied and representations . It is essential to analyse the terms which have been violated and any clauses and disclaimers which might impact the claims of Cynthia.

Steps for collecting evidences

• Record Chronology: Make a detailed event timeline, noting every communication instance and also the content of every interaction which will aid them in showcasing an effective and clear narrative.
• Organize Documents: Maintain all the relevant documents in effective manner which includes all receipts, communication documents and contract copies.
• Secure Witnesses: Identify all the witnesses early to ensuring that such witnesses are ready to offer statements if required . Record and store their statement effectively in detail and get it signed by them.

Thus, by collecting evidences and legal advice of an expert, Cynthia could seek remedies which are best as per the situation.

CONCLUSION

This report has discussed about misrepresentation, its ingredients and the different types of misrepresentation. The overall report has concluded that Cynthia has a robust claim against the misrepresentation done by Jatinder, mainly on the basis of false statement related to the actual number of constant customer. This overall analysis identified that the misrepresentation could be considered as innocent or negligence which is wholly depending on the situations. Cynthia can seek justice and financial damages for misrepresentation by seeking advice of a legal expert and pursuing proper remedies.

REFERENCES

Books and Journals

• Anson CM, “Fraudulent Practices: Academic Misrepresentations of Plagiarism in the Name of Good Pedagogy” (2011) 39 Freshman English News 29 https://www.jstor.org/stable/pdf/compstud.39.2.0029.pdf
• Atiyah PS and Treitel GH, “MISREPRESENTATION ACT 1967” (1967) 30 Modern Law Review 369 https://doi.org/10.1111/j.1468-2230.1967.tb01149.x
• Davies PS, “RESCISSION FOR MISREPRESENTATION” (2016) 75 The Cambridge Law Journal 15 https://doi.org/10.1017/s0008197316000131
• Dixon TL and Linz D, “Race and the Misrepresentation of Victimization on Local Television News” (2000) 27 Communication Research 547 https://doi.org/10.1177/009365000027005001
• Gergen MP, “Negligent Misrepresentation as Contract” (2013) 101 California Law Review 953 https://escholarship.org/content/qt1vc0j5x5/qt1vc0j5x5.pdf?t=lnrwkf
• Green L, “Innocent Misrepresentation” (1933) 19 Virginia Law Review 242 https://doi.org/10.2307/1065958
• Harris J and Bromiley P, “Incentives to Cheat: The Influence of Executive Compensation and Firm Performance on Financial Misrepresentation” (2007) 18 Organization Science 350 https://doi.org/10.1287/orsc.1060.0241

ONLINE REFERENCES

• ADVOCATES FOR INTERNATIONAL DEVELOPMENT and lawyers from www.a4id.org, BASIC PRINCIPLES OF ENGLISH CONTRACT LAW https://www.a4id.org/wp-content/uploads/2016/10/A4ID-english-contract-law-at-a-glance.pdf
• Harper James, “Misrepresentation in Contract Law | Harper James” (Harper James, May 12, 2023) https://harperjames.co.uk/article/contracts-misrepresentation/#:~:text=Misrepresentation%20arises%20out%20of%20'contractual,suffered%20loss%20as%20a%20consequence.
• Lincolnroweft and Lincolnroweft, “Fraudulent Misrepresentation: How to Prove It and How to Deal with It – Lincoln & Rowe Law Firm” (Lincoln & Rowe Law Firm – Dispute Resolution Law Firm, June 15, 2023) https://lincolnandrowe.com/2023/05/11/dealing-fraudulent-misrepresentation/

Lsit Of Figures

• Figure 1 - How to use the Misrepresentation Act 1967, 2016, Online available at < https://thecomplainingcow.co.uk/how-to-use-the-misrepresentation-act-1967/ >
• Figure 2 – Misrepresentation, Online available at<https://corporatefinanceinstitute.com/resources/valuation/misrepresentation/ >
• Figure 3 - Fundamentals of Law Misrepresentation, 2019, Online available at<https://slideplayer.com/slide/16124261/ >

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