LLB170 Lecture Notes - Lecture 9: Australian Consumer Law, G.992.5, Embezzlement
Week 9 – Misrepresentation and Misleading and Deceptive Conduct
Misrepresentation – The General Law Position
A misrepresentation in contract law is an innocent or false statement made by one person
(representor) to another person (representee) that induces the representee to enter into a
contract
Principal remedy is rescission
Damages only available if a tort is established → deceit and negligence → require proof of
culpability and proof of reliance and actual damage
Elements
1. The representation must be part of a past or present fact
- If a misrepresentation is ambiguous, it will first have to be determined what it
means before it can be determined if it is false
- the sese i hih a epesetatio ould e udestood a easoale
person in the position of the representee is prima facie the sense relevant to the
uestio hethe the epesetatio is false Krakowksi v Eurolynx Properties)
- can be written, oral or implied by conduct
- Any form of future statements, such as promises, predictions, and forecasts are
generally not actionable
(Civil Service Cooperative Society of Vic v Blyth (1914) 20 SLR 161, 169)
- What is the statement of fact hidden?
▪ in a statement of future intention?
▪ Not misrepresentation simply because that thing does not happen
▪ HOWEVER, making a promise represents intention, NO intention =
misrepresentation
Edgington v Fitzmaurice issuig deetues to aise apital to eale us
to do apital oks...
▪ in an expression of opinion?
▪ Distinguish between mere sales talk/belief and fact
▪ Sales talk characterised by extravagant & colourful talk that no
reasonable person would take literally
Smith v Land & House a most desirous teat
Fitzpatrick v Michel flats would rent fo £5p
▪ in a statement of law?
Public Trustee v Taylor )oed “peial Use
- Puffery, statements of intention, and opinion are generally not actionable
(Blisset v Wilkinson (1926) All ER 343, 346)
- A statement of future intention can sometimes constitute a representation of
fact (Edgington v Fitzmaurice)
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Smith v Land and House Property Corp (1884) 28 Ch D 7
Facts
Land and House contracted with Smith to buy the title of the Marine Hotel at Walton-on-the-Naze. Smith had
advertised that it was let to Fleck, "a most desirable tenant". Land and House agreed to buy the hotel however
Fleck, who had been overdue with rent, went bankrupt just before transfer of title. Land and House refused to
complete the transaction, defending Smith's specific performance on the basis that the description of Fleck's
virtues was grounds for misrepresentation
Held
Bowen held that when facts are equally known to both sides, then statements are generally opinions, however
when facts are not equally known, then a statement of opinion by one who knows the facts best is often a
statement of material fact as they are implying that his opinion has justification. In this case, with Fleck being
behind in his rent, the statement of him being a "desirable tenant" was not a true statement and thus Land and
House were entitled to not complete the transaction due to misrepresentation
Appeal dismissed
Ratio
• A statement of opinion, from a knowledgeable party to one who is not, is a representation. If false, it is
actionable
• Innocent misrepresentation allows rescission
Fitzpatrick v Michel (1928) 28 SR (NSW) 285
Facts
The Plaintiffs entered a contract to lease flats off the Defendant. The Defendant made a representation that
the flats would be able bring in 6 guineas a week (if sub-let), but that turned out to be false. They brought an
action for misrepresentation
Held
• Court was asked to take the view that the representations with regard to the rentals were matters of
opinion only, but an expression of opinion always involves some statement of fact – i.e. that the
opinion is actually held by the person expressing it
• Statements regarding the future cannot be factual in the same way as present facts.
• To prove a breach of warranty that the flat could be let for 6 guineas, it would be enough to show that
there was no one willing to pay that rent
• If a statement is an honest expression of opinion, honestly entertained, it cannot be said that it
involves a fraudulent misrepresentation of fact
Note: the fact a defendant honestly thought something was true does not protect him from breach of a term,
however it does protect him from a misrepresentation. "Honesty of belief in the truth of a warranty is no
defence to a breach of warranty, whereas it is a complete defence to a charge of false representation. If a
statement is an honest expression of opinion, honestly entertained, it cannot be said that it involves a
fraudulent misrepresentation of fact."
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Edgington v Fitzmaurice (1885) 29 Ch D 459
Facts
The claimant purchased some shares in the defendant company. The company prospectus stated the shares were
being offered in order to raise money to expand the company. In fact, the company was experiencing financial
difficulty and the money raised from the sale of the shares was going to be used to pay the company debts
Held
Despite the fact that the statement related to a statement of future intent, it was an actionable misrepresentation
as the defendant had no intention of using the money to expand the company
Public Trustee v Taylor [1978] VR 289
Facts:
Befoe the autio of a popet, the plaitiffs aget desied the popet as )oed: speial use . “ujet to
oad ideig i its adetiseets. The popet as sold to the defedat ho paid a deposit. Befoe the date
of contract completion, he purported to rescind the contract and demanded his deposit back on the basis he was
induced to enter the contract by misrepresentation concerning the advertisement of the property as the land was
not zoned for special 10 use as advertised.
The plaintiff claimed specific performance for performance of contract and damages for breach.
Held:
Misrepresentations of law will entitle the Representee to relief:
• "The same rights and consequences should flow from the making of fraudulent misrepresentation of law by
which a party was induced to enter into a contract and from the making of a fraudulent misrepresentation
of fact."
• This is because a statement of law necessarily implies a representation that the Representor knows that
law is such and such, which is a statement of fact
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Document Summary
Week 9 misrepresentation and misleading and deceptive conduct. A misrepresentation in contract law is an innocent or false statement made by one person (representor) to another person (representee) that induces the representee to enter into a contract. Damages only available if a tort is established deceit and negligence require proof of culpability and proof of reliance and actual damage. Elements: the representation must be part of a past or present fact. Any form of future statements, such as promises, predictions, and forecasts are generally not actionable (civil service cooperative society of vic v blyth (1914) 20 slr 161, 169) What is the statement of fact hidden? in a statement of future intention: not misrepresentation simply because that thing does not happen, however, making a promise represents intention, no intention = misrepresentation. Smith v land & house (cid:858)a most desirous te(cid:374)a(cid:374)t(cid:859) Public trustee v taylor (cid:858))o(cid:374)ed pe(cid:272)ial use (cid:1005)(cid:1004)(cid:859)
