Law 2101 Lecture Notes - Lecture 3: Scots Law, Law Reports, Misrepresentation Act 1967
22 May 2018
School
Department
Course
Professor
Misrepresentation and unfair commercial
practices
OVERVIEW OF CURRENT SCOTS LAW
Misrepresentation
1. The remedies available to the victim of a misrepresentation are dependent upon a
number of factors: in particular, whether the misrepresentation is innocent, negligent or
fraudulent; and whether the representation has become a warranty.
Innocent, negligent and fraudulent misrepresentations
2. A consumer seeking to establish a cause of action founded on misrepresentation –
whether innocent, negligent or fraudulent – must fulfil the following criteria:
• There must have been a misrepresentation of fact made prior to conclusion of the
contract; either by inaccurate statement or by positive act. In the limited
circumstances in which a duty to disclose exists, non-disclosure may also amount to
a misrepresentation.1 Statements of opinion, verba jactantia (eg invitations to treat or
"trade puffs") or statements of future intention will not suffice.
• The misrepresentation must have been made by the trader or by another party acting
on behalf of the trader.
• The misrepresentation must be shown to be material in the sense that it was a factor
which would have induced a reasonable person to enter into the contract. 2
• The misrepresentation was a factor which actually induced the consumer to enter the
contract; although it need not be the sole factor.
Where the above criteria are met, the misrepresentation is said to be operative and, in the
absence of further averments, the ensuing contract may be challenged on the ground that it
was induced by innocent, ie non-fraudulent, misrepresentation. It is unnecessary to show
fault on the part of the trader because at the time when the concept of error induced by non-
fraudulent misrepresentation was introduced into Scots law, no distinction was drawn
between negligent and non-negligent representations.3
3. A consumer who has been induced to enter into a contract by an innocent
misrepresentation by a trader is entitled to seek reduction of the contract. Unless and until
the contract is reduced, a valid, albeit voidable, contract subsists between the parties.4
1 Such a duty exists where the parties are in a fiduciary or quasi-fiduciary relationship; the contract is uberimae
fides; a person tells a half-truth; or a person fraudulently conceals the true state of affairs.
2 Menzies v Menzies (1893) 20R 108, following the House of Lords' decision in the English case of Adam v
Newbigging (1888) LR 13 App Cas 308.
3 This remains the case except in relation to the availability of damages as a remedy (see below).
4 The fraudulent misrepresentation by a trader may, however, be apt to prevent consensus in idem arising. In
such circumstances the contract is void ab initio rather than voidable. As the test for consensus is objective, the
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There is no equivalent in Scots law of the power of the court in England and Wales under the
Misrepresentation Act 1967, section 2(2) to order the payment of damages in place of
reduction. Furthermore, reduction of the contract will be denied where restitutio in integrum
is not possible.5 However, it follows that where granted reduction will be accompanied by
restitution, putting the parties back in the position they were in before the contract was
made. It should be noted that Scots law draws a distinction between reduction on the one
hand, and rescission on the other. Whereas reduction seeks to put the parties in the
position in which they would have been had the contract never existed, rescission absolves
the parties of the future performance of primary obligations but has no effect on accrued
rights.6 The extent to which an aggrieved party may annul a contract for misrepresentation
or induced error, without seeking a decree of reduction, is uncertain in Scots law.7
4. In the case of fraudulent misrepresentations, however, a consumer is entitled to seek
reparation by way of damages in addition, or as an alternative, to reduction of the contract;
fraudulent misrepresentation is regarded by Scots law as a delict.8 In addition to the criteria,
detailed above, the consumer must show that the trader against whom fraud is averred had
the requisite mens rea. The test for proving fraud, with regard to fraudulent statements, is as
set out by Lord Herschell in Derry v Peek.9 Notwithstanding the test in Derry v Peek, a
misrepresentation of fact may be deemed fraudulent although made with belief in its truth if
that belief was devoid of any reasonable basis.10
5. At common law, damages were available only where the misrepresentation was
fraudulent. Where, however, fraud could not be proved, the representee's only remedy was
reduction.11 The rule in Manners v Whitehead12 which barred entitlement to damages for
misrepresentation, other than for those which were fraudulent, was removed by the Law
Reform (Miscellaneous Provisions) (Scotland) Act 1985. Section 10(1) provides as follows:
A party to a contract who has been induced to enter into it by negligent
misrepresentation made by or on behalf of another party to the contract shall not be
disentitled, by reason only that the misrepresentation is not fraudulent, from
recovering damages from the other party in respect of any loss or damage he has
suffered as a result of the misrepresentation, and any rule of law that such damages
cannot be recovered unless fraud is proved shall cease to have effect.
6. Unlike the Misrepresentation Act 1967, however, section 10 does not create a legal
fiction whereby misrepresentations which are negligent are equated with those which are
occurrence of such dissensus is rare. See The Laws of Scotland (Stair Memorial Encyclopaedia) vol 15, para
680.
5 William W McBryde, The Law of Contract in Scotland (3rd Ed, 2007), para 15-72 et seq.
6 For further on the effect of rescission, see Lloyd's Bank plc v Bamberger 1993 SC 570 at 573 (Lord Justice
Clerk (Ross)).
7 See, for example, MacLeod v Kerr 1965 SC 253. See also Hector L MacQueen and Joe Thomson, Contract
Law in Scotland (2nd Ed, 2007), para 4.8.
8 Bryson & Co Ltd v Bryson 1916 1 SLT 361; Smith v Sim 1954 SC 357.
9 This test was adopted into Scots law in Boyd & Forrest v Glasgow & South Western Railway Co 1912 SC (HL)
93. See also Robinson v National Bank of Scotland 1916 SC (HL) 154.
10 Western Bank of Scotland v Addie (1867) 5 M (HL) 80 at 87 (Lord Chelmsford LC).
11 For a discussion, see the Scottish Law Commission's Report on Negligent Misrepresentation, Scot Law Com
No 92 (1985).
12 (1898) 1 F 171, 6 SLT 199.
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