Before a contract is formed, statements can be made by one party to induce the other party to enter into the contract by way of sales pitches, casual conversations, and formal meetings. Misrepresentation misleads the other party into signing the contract when they otherwise might not have.
In our previous blog, we mentioned the four elements of misrepresentation in contract law:
- An untrue statement;
- A statement of fact, not opinion or future intention;
- A statement must be made by one contracting party to the other; and
- The statement must induce the other party into entering into the contract.
This blog is going to focus on the first element.
Untrue statement
This may be oral, in writing, or by conduct. The question of whether a statement is true or not is not always that straightforward. The test to apply is whether or not the statement is substantially true – if a statement is mostly true, then as long as the true part of the statement induced the other party to enter into the contract, then that statement is true.
Untrue statement by conduct
In one case, the Court held that, by participating in the commercial photo shoot in April 1998, Spice Girls represented that they did not know or have reasonable grounds to believe that any members would leave. This was untrue because one of the five members of the group, i.e., Geri Halliwell (Geri), gave notice of her intention to leave in March 1998. The group’s participation in the shooting amounted to a misrepresentation by conduct, giving the impression that Geri intended to remain part of the group in the foreseeable future, and the sponsor, who had relied on the misrepresentation when entering into the sponsorship contract, was entitled to damages.
Conduct is different from silence. The general rule is that there is no obligation to disclose material facts before you enter into a contract. For example, you walk into an antiques shop and believe that one of the items is very rare and worth more than the asking price. The owner of the shop overhears your comments about that item and does not tell you that it is not as valuable as you think it is. You buy the item and later discover that it is worth less than the price you paid. There is no cause of action against the owner here because of the said general principle – buyer beware.
However, there are also situations when silence may amount to misrepresentation:
- Where there is active concealment of the truth;
- Where there is a fiduciary relationship (i.e., one of trust and confidence) between the parties;
- Where the contract is one of the utmost good faith, like contracts of insurance, and one party is in a strong position to know the truth;
- Where there has been a half-truth. It is generally more acceptable to tell the whole truth or nothing at all, and
- Where a statement of fact is true when made, but a change of circumstances occurs before the contract is formed that makes the statement untrue, and the change is not disclosed.
How can we help?
Ronny Tang is an Associate in our expert Dispute Resolution team, specialising in defamation claims, contentious probate and inheritance claims, Trusts of Land and Appointment of Trustees Act 1996 claims, Equality Act 2010 claims and Protection From Harassment 1997 claims.
If you need any advice concerning the subject discussed in this article, please do not hesitate to contact Ronny or another member of the team in Derby, Leicester, or Nottingham on 0800 024 1976 or via our online enquiry form.
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