Topic 7 Misrepresentation Misrepresentation is a false statement as to fact made by one party which induces another to enter into the contract during the Pre-Contractual Period . Pre-Contractual Period : During this period of negotiations, statements made by one party may influence a party to enter the contract. The pre-contractual statement might miss the ‘target’ failing to become part of the contract as a term for two reasons: a) The parties failed to record the statement as a term in their written contract. The Parole Evidence Rule , spoken statement cannot be included later unless an exception applies or a collateral contract can be established. b) The parties failed to establish the statement as a term in their spoken contract. Case: ( Oscar Chess v Williams ) Facts : Williams traded in his car, which he said was a 1948 model, on a new one. It was actually a 1939 model. Williams was unaware of the error, as a previous owner had fraudulently altered the log book. Oscar Chess Ltd (the car dealer) sued for damages for breach of contract to recoup the excess trade-in they had paid. Held : The plaintiff’s claim failed. The court held that William’s statement was not a term of the contract, but was a misrepresentation. Factors: • The objective intention of the parties • The actual words used • The proper inferences from known facts • Whether the statement was reduced to writing • The comparative skill and knowledge of the parties As Williams’ statement was not a term of the contract, the court could not award damages for breach of contract. Oscar Chess could have proved innocent misrepresentation (Williams unknowingly made a false statement), but the remedy for that is rescission, not damages. The court could not rescind this contract. 1

Type of Misrepresentation Innocent Misrepresentation is a false statement made honestly and may void the contract. i. Must be one of fact (not opinion). Case: ( Bissett v Wilkinson ) Facts : The claimant purchased a piece of farm land to use as a sheep farm. He asked the seller how many sheep the land would hold. The seller had not used it as a sheep farm but estimated that it would carry 2,000 sheep. In reliance of this statement the claimant purchased the land. The estimate turned out to be wrong and the claimant brought an action for misrepresentation. Held : A farmer who said his land could carry 2000 head of sheep was not misrepresenting the capacity. Bissett was a cattle farmer and had never used his land to farm sheep – it was therefore not a statement of fact.