Misrepresentation

What is Misrepresentation?

A misrepresentation is a false statement of fact made by one party to another party, which, whist not being a term of the contract, includes the other party to enter the contract. This usually results in the innocent party suffering some form of loss to damage. 

Types of Misrepresentation

1. Fraudulent Misrepresentation

• this occur where an untrue statement is made knowingly or with our belief in its truth.

Example-

Derry v. Peek (1889)

A company was empowered to run trams by horsepower by steam. The directors issued a prospectus containing a statement that by this special Act the company had the right to use steam instead of courses. The plaintiff bought share on the strength of this statement. The Board of Trade refused to consent to the us of steam and the company was wound up. The plaintiff brought an action for deceit.

2. Negligent Misrepresentation 

• is a false statement made by a person who had no reasonable grounds for believing it to be true.
• is a "breach of a dirt of care".
• be a case where the duty is owned and breached.
• this can occur in a special relationship, or if an opinion is given carelessly by an expert.
• two possible way to aim: either under common law or statute.

Example-

Esso Petroleum Ltd v. Mardon (1976)

Esso purchased a vacant site on which to build a filling station. Before bidding on the site, Esso estimated that the throughput of petrol on a certain site would be reach 200,000 gallons in the third year of operation and so persuaded Mardon to enter into a tenancy agreement in April 1963 for three years. Mardon did all that could be expected of him as tenant but the site was not good enough to achieve a throughput of more than 60,000-70,000 gallons. Mardon lost money and was unable to pay for petrol supplied. Esso claimed possession of the site and money due. Mardon claimed damages in respect of the representation alleging that it amount to a warranty and a negligent misrepresentation. 

3.  Innocent Misrepresentation 

• is relatively easy to prove, requiring only proof of a false statement that induced the contract.
• a false statement which the person makes honestly believing it to be true.

Example-

Redgrave v. Hurd (1881)

Redgrave, a solicitor purchased into the partnership in the solicitors' firm. He said in an interview with Hurd that the practice brought in £300 per year. Redgrave showed him summaries that came to a £200 per year average income and said that the rest of the £300 figure was borne out by other papers in the office that he could check. Hurd did not inspect the papers, until he realised the truth just before completion of the agreement. He had signed the contract but he refused to go through.

Example of the real case in Malaysia regarding misrepresentation-

Mohd Shuaib Ishak v. Celcom (Malaysia) Berhad (2008) 1 LNS 314

The main beneficiaries of the wrongdoings have been Telekom, Telekom Enterprise and parties acting in concert as they succeeded in taking over Celcom at a relatively low price and the burden to pay DeTeAsia was passed on to Celcom. The main losers have been Celcom, which had to pay substantial damages to DeTeAsia and the shareholders of Celcom who should have received RM7.00 per share instead of RM2.75 under the MGO.