One the english legal system has developed a

One of the fundamental principlesunderpinning English contract law is that there should be a meeting of mindsbetween the parties (consensus ad idem). Inevitably questions will be asked andstatements made during the pre-contractual negotiations which will impact uponeach party’s decision to enter into a legally binding agreement.

However, it ispossible that some of the statements made and relied upon may not be accurateand amount to a misrepresentation in English law, casting doubt on the validityof the contract and providing the aggrieved party with a suitable remedy. In English contract law, 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 toenter the contract giving the innocent party the right to rescind the contractand/or claim damages. Over the years the English Legal System has developed aseries of principles which provide guidance on the application of the lawrelating to misrepresentation.

To be actionable in Englishlaw, the misrepresentation must be a false statement of fact, not opinion orfuture intention or law. It must involve a positive statement by one partywhich induces the other to enter into the contract which means that silencewill generally not amount to a misrepresentation Smith v Hughes 1871. However, there are exceptions to this rule for example contracts involving the sale ofland and insurance. A false statement of opinionwill generally not amount to misrepresentation however there are exceptions ashighlighted in the case of Smith v Land House Corp. 1884 in which the claimantpurchased a hotel.

The seller described one of the tenants as being ‘ mostdesirable’. In fact, as the seller knew, the tenant was in arrears and on theverge of bankruptcy. This was held to be a statement of fact rather thanopinion as the seller was in a position to know the facts.

Different types ofmisrepresentation exist in English Law, accordingly misrepresentativestatements may be made fraudulently, negligently or innocently. Fraudulent misrepresentationwas defined by Lord Herschell in the case of Derry v Peek(1889) as a falsestatement that is “ made (i) knowingly, or (ii) without belief in itstruth, or (iii) recklessly, careless as to whether it be true or false.” Negligent misrepresentationinvolves one party making a false statement having no reasonable grounds forbelieving that the statement is in fact true. A case to illustrate thisprinciple is Hedley Byrne v Heller in which the defendant was held liable as aduty of care existed. Further, under s. 2(1) Misrepresentation Act 1967, anegligent misrepresentation has been defined as a statement made withoutreasonable grounds for belief in its truth. Here, the burden of proof rests onthe representor to demonstrate they had reasonable grounds for believing thestatement to be true.

Innocent misrepresentationinvolves a party making a false statement which he reasonably believes to betrue not only at the time of making the statement but also when the contractwas actually entered into. Remedies available formisrepresentation are dependent on the type of misrepresentation. For all typesthe remedy of rescission is available. This is putting the parties back intheir pre-contractual position.

Each party gives back the benefit which theyhave received under the contract. However, it is not always possible to rescindthe contract and in some circumstances the right to rescind may be lost inwhich case damages may be considered a more appropriate for the injured party.