Chapter 5 Guidance on answering the questions in the book

Misrepresentation and non-disclosure

1. How can you tell whether a pre-contractual statement is: (a) a term, (b) an actionable misrepresentation, or (c) a puff? Why does it matter?

See 5.1.1 Representations and terms.

This question invites you to discuss the classification of statements made in the context of contract negotiations and its remedial consequences.  The sub-questions you should address are:

  • What are the theoretical differences between (a)-(c)?
  • How is the distinction between (a)-(c) made in practice?
  • To what extent is the distinction based on the parties' intention and to what extent on other considerations (which are?)? 
  • What differences does it make at the remedial end (what can a claimant receive for breach of term, misrepresentation or an untrue puff?)? See The remedial importance of the distinction)?
  • What difference might it make whether the claimant made a 'good' or 'bad' bargain?

2. Explain (giving examples) the different between: a. damages for breach of contract; b. damages for misrepresentation; and c. money claims related to rescission.

See 5.1.1 Representations and terms and 5.3 Money awards for misrepresentation.

This question tests your understanding of the different types of money claims which may attach to a statement made in the context of contract negotiation.  The relative sums involved may determine how claims should be prioritized (starting with that which is most advantageous to the claimant). 

3. When is, and when should, rescission be available for misrepresentation?

See 5.2 Rescission for misrepresentation.

Which types of misrepresentation entitle the claimant to rescind the contract? 

What are the bars to rescission?  Is each of the bars justified?  If not, why not and how can they be reformed? 

Which bars were dismantled and which introduced by the Misrepresentation Act 1967?  Critically assess these.

4. To what extent can a party exclude or restrict liability for misrepresentation?

See 5.4 Exemption of liability for misrepresentation.

Can liability for fraud be exempted? 

What statutory controls exist under the Misrepresentation Act 1967 and Consumer Rights Act 2015? 

What are the statutory tests of validity of clauses exempting liability for misrepresentation? 

What amounts to a clause exempting liability for misrepresentation (eg do 'no agent authority clauses' or 'entire agreement clauses' qualify for statutory control? Give examples)?   

5. Did the Misrepresentation Act 1967 improve the law on misrepresentation?

This question invites you to assess the benefits and drawbacks of the 1967 Act. 

What mischief was sought to be addressed by the 1967 Act?  To what extent did it succeed in doing so?

The difficulties you could address include:

  • The measure of damages under section 2 (1).
  • The ‘fiction of fraud’.
  • When damages will be ordered in lieu of rescission under section 2 (2).
  • The availability of section 2 (2) damages where the right to rescind has been lost.
  • The measure of damages under section 2 (2).
  • The interaction between section 2 (1) and section 2 (2) damages.
  • The measure of damages where a misrepresentation has been incorporated as a term of the contract.
  • The scope of section 3.

6. Katie wants to set up an ostrich farm and discusses with Leo the possibility of buying Leo’s flock. Leo says:

You take them as they are. Get them checked if you like, but I’m an old hand and I say they’re in the peak of health. I saw an article yesterday that said you’ll get a 500% return. If you go ahead, my restaurant chain will be your best customer.

Katie buys Leo’s ostriches. Advise Katie on the following facts:

  1. no orders were ever placed by Leo’s restaurants.
  2. 25% of the birds were sick at the time of purchase and die shortly after.
  3. The article Leo mentions is two years old; more recent and available market research shows declining consumer demand for ostrich meat; Katie can only sell the remaining flock at a loss.

What does Katie want (eg rescission (can she?), damages (expectation or reliance?))?

Re (i): the statement about the health of the birds is unlikely to be a term (why?)?  Is it a mere statement of opinion? Or, does it contain an implied and false statement of fact? Does it matter that Katie did not check?

Can Katie rescind?  Is she barred?

Can Katie claim damages?  What is the nature of her action?  What is her measure of damages?

Re (ii): the statement about the article is unlikely to be a term (why?)?  The statement is literally true but does it imply a false statement of fact?  If so, can she claim rescission (bar?)?  What damages can she claim?

Re (iii):  the statement as to possible future purchases is a statement as to the future. 

Does it contain an implied and false statement of fact?  If so, is rescission or damages for misrepresentation available?

Is it possible to argue that the statement is a contractual promise to purchase such that expectation damages are available for breach?  What are the obstacles to such a claim?  What further facts do you need to know?