In the formation of a contract, statements made during negotiations are crucial as they can influence a party’s decision to enter the agreement. When such a statement turns out to be false, the law of misrepresentation provides a remedy for the wronged party. A misrepresentation is an untrue statement of fact or law made by one party to another, which induces them to enter into the contract (McKendrick, 2022). This essay will explain the core components of an actionable misrepresentation, focusing on the distinction between statements of fact and other statements, and the limited circumstances in which silence can constitute a misrepresentation.
Statements of Fact, Opinion, and Intention
For a statement to be an actionable misrepresentation, it must be a statement of existing fact or law, not merely an opinion or a statement of future intention. The courts have established a general rule that a simple statement of opinion, which proves to be unfounded, will not give rise to a claim for misrepresentation. The classic case illustrating this is *Bisset v Wilkinson* [1927] AC 177, where a seller of a farm, who had never used it for sheep farming, stated his opinion that it could support 2,000 sheep. This was held to be a statement of opinion and not an actionable misrepresentation because both parties were aware that the seller had no special knowledge on which to base his statement.
However, this rule is not absolute. If the party stating the opinion is in a better position to know the true facts, their statement of opinion may be treated as an implied statement of fact. In *Smith v Land and House Property Corp* (1884) 28 Ch D 7, a seller described a tenant as ‘a most desirable tenant’. In reality, the tenant was in arrears with rent. The court held that the seller’s statement was more than a mere opinion; it was an implied assertion that he knew of no facts which would lead to the conclusion that the tenant was not desirable. Similarly, a statement of future intention is generally not a statement of fact. However, if a person misrepresents their state of mind at that moment, it can be treated as a false statement of fact. In *Edgington v Fitzmaurice* (1885) 29 Ch D 459, a company prospectus invited loans, stating the money would be used for business expansion. The real intention was to pay off debts. Bowen LJ famously remarked that “the state of a man’s mind is as much a fact as the state of his digestion.” Therefore, a dishonest statement of intention is an actionable misrepresentation of fact.
When Silence Can Amount to Misrepresentation
The general principle in English contract law is *caveat emptor*, or ‘let the buyer beware’. This means there is no general duty for a contracting party to volunteer information to the other party (*Keates v Cadogan* (1851) 10 CB 591). However, the law recognises several exceptions where silence or a failure to disclose can be deemed a misrepresentation.
First, a statement that is technically true but creates a misleading impression because it does not reveal the whole truth is a misrepresentation. These are often called ‘half-truths’. In *Dimmock v Hallett* (1866) LR 2 Ch App 21, a seller of land stated that the farms on the land were fully let, but failed to mention that the tenants had given notice to quit. This was held to be a misrepresentation because the statement, while literally true, was designed to mislead.
Second, if a statement was true when made but becomes false due to a change in circumstances before the contract is finalised, the maker of the statement has a duty to correct it. In *With v O’Flanagan* [1936] Ch 575, a doctor selling his medical practice stated its income was at a certain level. By the time the sale was completed, the practice’s value had plummeted because the doctor had been ill. His failure to disclose this change was held to be a misrepresentation.
Third, certain contracts are classified as being of the utmost good faith (*uberrimae fidei*). In these contracts, there is a positive duty of full disclosure of all material facts. The most common example is an insurance contract, where the insured must disclose to the insurer all facts that would influence the insurer’s decision to offer cover or set the premium.
Finally, a duty of disclosure exists where there is a fiduciary relationship between the parties, such as that between a solicitor and their client, or a trustee and their beneficiary. The nature of these relationships imposes a duty of loyalty and disclosure on the fiduciary.
Conclusion
In summary, the law of misrepresentation is primarily concerned with false statements of fact that induce a contract. While simple opinions and intentions are generally not actionable, the courts will intervene where an opinion implies knowledge of facts or where an intention is dishonestly stated. Furthermore, although the principle of *caveat emptor* means that silence is not usually a misrepresentation, important exceptions have been established to prevent injustice arising from half-truths, changes in circumstances, and in special types of contracts and relationships where a higher duty of disclosure is expected.
References
* McKendrick, E. (2022) *Contract Law: Text, Cases, and Materials*. 10th edn. Oxford: Oxford University Press.
* *Bisset v Wilkinson* [1927] AC 177.
* *Dimmock v Hallett* (1866) LR 2 Ch App 21.
* *Edgington v Fitzmaurice* (1885) 29 Ch D 459.
* *Keates v Cadogan* (1851) 10 CB 591.
* *Smith v Land and House Property Corp* (1884) 28 Ch D 7.
* *With v O’Flanagan* [1936] Ch 575.
