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CHAPTER 2

THE WEAPONS OF LAW

2.3.5Statutory Misrepresentation
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The Misrepresentation Act 1967 (U.K.) gave a statutory right to damages in cases where a person has suffered loss as a result of non-fraudulent misrepresentation.


Section 2(1) of this Act states:

Where a person has entered into a contract after a misrepresentation has been made to him by another party thereto and as a result thereof he has suffered loss, then, if the person making the representation would be liable to damages in respect thereof had the representation been made fraudulently, that person shall be so liable notwithstanding that the misrepresentation was not made fraudulently, unless he proves that he had reasonable grounds to believe and did believe up to the time that the contract was made that the facts represented were true.


Such a statutory right, similarly worded, was passed into Irish Law under Section 45(1) of the Sale of Goods and Supply of Services Act 1980 (in Part V, Misrepresentation).


N.B.
Under these Acts the person alleging misrepresentation must show that misrepresentation exists, i.e. he must show that the four conditions necessary for the existence of misrepresentation (as previously described in Section 2.3.1) have been fulfilled. However, he is not required to prove that the misrepresentation is either fraudulent or negligent, within the parameters defined at Common Law, in order to claim damages. Of particular significance is the fact that the party against whom the misrepresentation is alleged, i.e. the representor,  is burdened with proving that he had reasonable grounds for believing and did believe that the facts represented were true ——— if he cannot prove this, he will be liable to the damages as stated in the Acts.


According to the Court of Appeal in Howard Marine v Ogden (U.K. 1978), the defendant must show objectively reasonable grounds for believing that the representation was true.11


Note! The scope of liability to damages for misrepresentation under Statute, as described above, is more limited than that under the Common Law for negligence; liability to damages for misrepresentation under the respective Acts only applies where a person has (a) entered into a contract after a misrepresentation has been made to that person and (b) the misrepresentation is made by another party to the contract, and not by a third party.12 (For the situations instanced in this website-book, the misrepresentations will either have been made by another party to the contract or by an agent acting for that party, and this limitation will not apply.)

 




Silence as Statutory Misrepresentation ?


We have seen in Section 2.3.1 that, from first principles, in order to amount to an operative misrepresentation, there must first be some positive statement, or some conduct from which a statement can be implied. 


We have seen in Conlon v Simms [see Section 2.3.4 (a)] that, where a duty to disclose exists, and the failure to disclose is deliberate, the non-disclosure amounts to fraudulent misrepresentation. 'Non-disclosure where there is a duty to disclose is tantamount to an implied representation that there is nothing relevant to disclose'. 



In Conlon v Simms there was a fraudulent non-disclosure where a fiduciary relationship existed.  


Where a fiduciary or confidential relationship exists, and the party under the fiduciary duty (to act in the interests of the other party) deliberately says nothing about the transaction / contract about to be undertaken by the other party, the positive statement to be implied from the conduct (the silent behaviour) of the party under the fiduciary duty to disclose is that 'there nothing to be disclosed that is relevant to your decision to enter into this contract'.



BUT, where a fiduciary or confidential relationship duty to disclose exists, this positive statement must be seen to be implied from the the conduct of the party under the fiduciary duty to disclose —— regardless of whether the silent behaviour is fraudulent, negligent or innocent.


IF this implied statement is false, THEN, the other necessary conditions also being satisfied, a misrepresentation will have been made by the party under a duty to disclose.


A logical conclusion would therefore be that such a breach of fiduciary duty to disclose would constitute statutory misrepresentation under the Acts cited above.


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But there will also be situations where a special relationship giving rise to a duty of care under the Hedley Byrne principles exists, and silence by the party under a duty to disclose would be equivalent to a positive statement that there is nothing to disclose.



In the most recent (29th) edition of Anson's Law of Contract, the learned authors draw particular attention, on pages 342 and 343, to the possible knock-on implications, of the decision in Conlon v Simms, with respect to the application of Section 2(1) of the Misrepresentation Act to non-disclosure where there is a duty to disclose. But it is also again worth noting that the decisions in Conlon v Simms, both in the original decision of Collins L.J. and in the subsequent Court of Appeal decision as stated by Jonathan Parker L.J., did not purport to create new Law on this matter, but set down their conclusions by incorporating strong legal argument from previous authorities that either stated or implied that, where a duty to disclose exists, failure to speak induces the belief that there is nothing of relevance to be said. [Again, see Section 2.3.4 (a).]


Note! Remember, also, that where silence distorts a positive statement, in that what is not disclosed makes what is said become a false representation, such silence would constitute statutory misrepresentation.

 





Section 3 of the Misrepresentation Act 1967 (U.K.), controlling exemption clauses, was redrafted by Section 8 of the Unfair Contract Terms Act 1977 (U.K.), which denied effect to an exemption clause in a contract that excluded liability for misrepresentation.



Again, a similarly worded control of certain provisions excluding liability for misrepresentation is written into the Irish Sale of Goods and Supply of Services Act 1980, under Section 46(1), which states :


If any agreement (whether made before or after the commencement of this Act) contains a provision which would exclude or restrict —

 

(a)

any liability to which a party to a contract may be subject by reason of any misrepresentation made by him before the contract was made, or

(b)

any remedy available to another party to the contract by reason of such misrepresentation,

that provision shall not be enforceable unless it is shown that it is fair and reasonable.



Again, remember the ‘Guidelines’ for Application of the Reasonableness Test, as described in Section 2.2.4 (c).

 


 

It will become clear, when we come to study the measure of damages for statutory misrepresentation  (in Section 2.8.4), that this Statutory Legislation relating to Misrepresentation presents the consumer with a very formidable weapon indeed.


Note! It is important to remember that all these Statutory Rights are in addition to your rights under Common Law.



11 Wheeler and Shaw, Contract Law, (1st ed.), p. 277.

12
Beatson, Burrows and Cartwright, Anson’s Law of Contract, (29th ed.), p. 326.

 

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