Singapore Contract Law – Misrepresentation

CONTRACT LAW – MISREPRESENTATION

This question involves misrepresentation under the law of contract and whether Rachel will be able to return the hand-phone to the shop.

Under contract law, a misrepresentation is defined as a false statement of a material fact made by one party to another which had induced the other party to enter into a contract.

In order to establish misrepresentation, the representation that has turned out to be false has to be a statement of an existing fact or past event. In the case of Bisset v Wilkinson (1927), the court held that there was no misrepresentation as the statement made was an opinion and not a fact. However, in this scenario, it is not likely that the sales executive’s statement was an opinion as whether the phone really had 12 megapixels and whether the phone had the highest megapixels in the market could be easily checked beforehand. As a retailer of the hand-phone, the sales executive would know if Thus, the sales executive would most likely be liable for misrepresentation.

Even if the statement was one of opinion, an action for misrepresentation may also lie if it can be proved that the maker of the statement did not actually believe in the truth of the opinion or if it can be established that a reasonable man having the maker’s knowledge could not have honestly held such an opinion. In the case of Smith v Land and House Property Corpn (1884), the court held that there was a misrepresentation as the vendor could not have honestly believed in the truth of his statement. In this scenario, the sales executive was in the business of promoting hand-phones and would thus be reasonably expected to have up to date knowledge of the situation regarding the megapixels available in phones in the market and even more so the exact number of megapixels the particular phone he was selling had. Thus, it is unlikely that the sales executive could have honestly believed in the truth of his own statement and that would amount to a misrepresentation.

Generally too, statements of future intention cannot give rise to misrepresentation. However, if it can be established that the maker did not actually believe in the statement of future intention an action for misrepresentation may lie. In the case of Edgington v Fitzmaurice (1885), the court held that there was actionable misrepresentation as the company knew the statement of future intention was false.

There would be no misrepresentation if the statement made were not a statement of fact but merely sales talk as a reasonable person would not have taken such statements seriously. However, in this scenario, the statement by the sales executive was not vague but very precise on the fact that the phone had twelve megapixels and thus was not likely to be sales talk.

Keeping quiet does not amount to misrepresentation. In the case of Keates v Lord Cadogan (1851), the court held that the seller was under no obligation make the disclosure and so there was no misrepresentation.

However, silence may amount to misrepresentation if a half truth is offered, if the maker realizes the statement is not true before the contract is made, in contracts of uberrimae fidei (general duty of good faith on the parties; insurance contracts), and in contracts where there is a fiduciary duty (partnerships).

In addition, to be able to sue for misrepresentation, the false statement must have induced the formation of the contract. In the scenario, Rachel had been looking for a hand-phone with a very high resolution camera. It is likely that Rachel would not have bought the phone if not for the sales executive’s statement that the phone had twelve megapixels which was the highest in town, thus Rachel had relied on the statement and was induced into making the purchase.

The misrepresentation need not be the sole factor that induces the formation of the contract. In the case of Edgington v Fitzmaurice (1885), the court held that it was possible to sue for misrepresentation even though the false statement was not the sole reason to induce the formation of the contract.

If it can be proved that there was no reliance on the false statement given by the maker, there would be no inducement. In the case of Smith v Chadwick (1884), the court held that the plaintiff could not sue for misrepresentation because he was not influenced by the false statement. Similarly in Attwood v Small (1838), the court held that the purchaser had relied on the report of other professionals and so could not sue for misrepresentation.

Even if the person relying on the information was given an opportunity to verify the truth but does not make use of it, that would not deprive him of his right to sue. In the case of Redgrave v Hurd (1881), the court held that the purchaser could still sue for misrepresentation even though he did not take up the opportunity to verify the truth of the statement. In the scenario, Rachel could have checked to see if the phone were really twelve megapixels but was not obliged to. Thus, she could still sue for misrepresentation.

Thus, it is most likely that there was indeed a misrepresentation in this scenario. For misrepresentation, the contract involved would become voidable and so Rachel would be able to carry on using the phone if she wanted or conversely, sue for misrepresentation.

The type of remedy that Rachel will be able to therefore claim will be determined by the type of misrepresentation that had been used.

There are three types of misrepresentations. Firstly, as stated in the case of Derry v Peek (1889), a misrepresentation is fraudulent if the maker knew it was false or did not believe in the truth of the statement or was recklessly careless whether the statement was true or false. Secondly, a misrepresentation would be negligent if it is made without reasonable grounds for its belief as in the case of Howard Marine & Dredging Co Ltd v A Ogden & Sons (Excavations) Ltd (1978). In the above two cases, the plaintiff could be granted with damages and/or rescission which is the return of the purchased good at its purchase price. Lastly, a misrepresentation would be innocent if there are reasonable grounds for its belief. In this case rescission would be granted and damages only in lieu of rescission.

In this scenario, the misrepresentation in question is most likely to be a fraudulent one that the sales executive knew was false as he was likely to have known the actual number of megapixels and also the current highest megapixel phone in the market. So Rachel would most likely be able to return the hand-phone to the shop and receive her purchase price in return.