Misrepresentation

        Hello guys.. for this week, we learned for both topic in a same day which are fraud and misrepresentation because both of this topic is quite similar and related to each other. However, I am still have to explain them separately otherwise you will not be able to understand the differentiate between them. Misrepresentation is a false statement of fact made by one party to another which, whilst not being a term of the contract induces the other party to enter the contract. Similar to fraud, we must bear into mind that section 14 of free consent must exist to enter a contract which does not caused by misrepresentation, which is defined under section 18 (a) of Contract Act 1950. This section stated that misrepresentation includes the positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true.

The effect also same with fraud which make a contract voidable pursuant to section 19 of CA. This section said when consent to an agreement is caused by coercion, fraud, or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused. Thus, the exception of this section make a contract become not voidable when party whose consent was so caused had the means of discovering the truth with ordinary diligence. In other words, a fraud or misrepresentation which did not cause the consent to a contract of the party on whom the fraud was practiced, or to whom the representation was made, does not render a contract voidable. Furthermore, there are distinction between fraud and misrepresentation. In fraud, the person making the representation does not himself, believe in its truth. Burden of proof in fraud cases is very high. However, in misrepresentation the person may believe the representation to be true. In order to apply misrepresentation or to make it actionable in a contract, there are some conditions need to be fulfilled.
        Firstly, false statement of fact. An actionable misrepresentation must be a false statement of fact, not opinion or future intention or law. This is because a false statement of opinion, a false statement by a person as to what he will do in the future and false statement as to the law are not misrepresentation of fact. Second one is inducement. The false statement must have induced the representee to enter into the contract. The requirements are the misrepresentation must be material and it must have been relied on.
        Other than that, the misrepresentation must be material, in the sense that it would have induced a reasonable person to enter into the contract. The representee also must have relied on the misrepresentation and there will be no reliance if the misrepresentee was unaware of the misrepresentation. This can be seen in the case of Horsfall v Thomas. The fact is Thomas bought a cannon which had been manufactured for him by Horsfall. The cannon had a defect which made it worthless, and Horsfall had endeavored to conceal this defect by the insertion of a metal plug into the weak spot in the gun. Thomas never inspected the gun and he accepted it. Upon using it for the purpose for which he bought the gun, the gun burst. The court held that as he never examine the gun, the concealment of defect did not influence him.
In regard with the types of misrepresentation, there are 3 types that can be discussed which are fraudulent, negligent and wholly innocent. Firstly, fraudulent misrepresentation was defined by Lord Herschell in Derry v Peek as a false statement that is made, knowingly, without belief in its truth, recklessly and careless as to whether it be true or false. Secondly, negligent misrepresentation is a false statement made by a person who had no reasonable grounds for believing it to be true. Under Common Law, refer to Hedley Byrne v Heller stated there are two possible ways to claim either under common law which are by negligent misstatement recoverable in tort or statute by section 2(1) of the Misrepresentation Act 1967.
Lastly, wholly innocent misrepresentation is a false statement which the person makes honestly believing it to be true and the usual remedy is rescission with an indemnity. This can be referred to the case of Sim Thong Realty Sdn Bhd v Teh Kim Dar which stated that the defendant is a limited company. It was keen on acquiring land to build a factory. It saw an advertisement in a newspaper placed by an estate agent which is Mr TK Wong, carrying on business as Wong Tai Kong Realty . The advertisement referred to certain land at the Jalan Kelang Lama area as being available for purchase. The land in question was owned by the defendant. By pre-arrangement, the defendant's representatives visited the land. Wong accompanied them. There was some discussion about the availability of access to the land in question. Wong represented to the defendant's representatives that the land had access to the main road. This was an important fact because, absent access, the land was worthless to the defendant. Following negotiations, the parties entered into a written sale and purchase agreement pursuant to which the defendant paid a deposit of RM254,204. It later transpired that the land in question had no access.
Moreover, in misrepresentation there are several remedies available. Firstly it is rescission. it means as to put the parties back in their original position, as though the contract had not been made. The injured party may rescind the contract by giving notice to the representor of his intention to rescind the contract. This can be referred to the section 67 of CA or he may apply to the court under section 34 (1) (a) of the Specific Relief Act 1950. This remedy also have limitations which are affirmation of the contract, restitution in integrum (impossible /ability to restore) and third party acquires rights or bona fide purchaser for value without notice.
Secondly, indemnity is an order of rescission may be accompanied by the court ordering an indemnity. This is a money paid by the misrepresentor in respect of expenses necessarily created in complying with the terms of the contract and is different from damages. For example, in any contract for the sale & purchase of a house, the purchaser not only pays the purchase price of the property but must also incur expenses that include legal fees, stamp fees and the others. Thirdly is damages. Damages generally granted in cases of fraudulent misrepresentation. The injured party may claim damages for fraudulent misrepresentation in the tort of deceit. Damages are available in addition to rescission because an action for fraud is grounded upon the tort of deceit.
Fuuhh, quite long right for this topic?🙀... But it is okay, we can do this💃So, it think that is all for today. Please wait for my update on next week for our last topic which is mistake.