Chapter 9: Representation and terms
Pre-Contractual and contractual statements
Pre contractual representation: A statement one party makes by words or conduct with the intention of
inducing another party to enter into a contract
Contractual term: A provision in an agreement that creates a legally enforceable obligation
If a non-contractual statement is false, it is defined as a party’s misrepresentation.
If a contractual statement is not fulfilled, it is defined as a party’s breach of contract.
The nature of misrepresentation
Misrepresentation: A false statement of fact that causes the recipient to enter in to a contract.
When an opinion is false it is not considered to be misrepresentation rather a misstatement.
Statement of future conduct: Is not a statement of fact as it is only an indication of a person’s future
Non-Factual statements (Not actionable as misrepresentation)
-Opinion based on speculation
-Description of another’s future intent
-Statement of law
Factual statements (Actionable as misrepresentation)
-Description of one’s present intent
-Statement of legal consequences
Silence as misrepresentation
-As a general rule, parties are not required to disclose material facts during pre-contractual negotiations,
no matter how unethical non-disclosure may be. Except for when:
-Silence would distort a previous assertion: When a change in circumstances affects the
accuracy of an earlier representation, the party that made the statement has a duty to disclose
the change to the other party.
-A statement is half-truth: A party cannot give a partial account if the unspoken words would
substantially alter the meaning of the actual statement
-The contract requires a duty of utmost good faith: Occurs when one party is in a unique
position where they must have full disclosure of information. Such as an insurance company
who needs all health information. -A special relationship exists between the parties: When the relationship between two parties is
one of trust, or when one of the parties has some other form of special influence over the other,
a duty of disclosure may arise.
-A statutory provision requires disclosure: Some statutes require the disclosure of material facts
in a contractual setting, such as insurance legislation and financial officers.
-Facts are actively concealed: If a party to a contract actively conceals the truth it may be
treated as misrepresentation.
-For a statement to be actionable as a misrepresentation, the deceived party must prove that the false
statement induced the contract.
The legal consequences of misrepresentation
There are two possible consequences of an actionable misrepresentation. The deceived party may
1. The remedy of recession
2. The right to damages
1. Recession: The cancellation of a contract, by the parties or the court, with the aim of restoring the
parties, to the greatest extent possible, to their pre-contractual state
- The remedy of recession is often acco