3. Misrepresentation a. What is a misrepresentation?

A misrepresentation is an untrue statement of fact or law made by Party A (or his agent for the purposes of passing on the representation, acting within the scope of his authority) to Party B which induces Party B to enter the contract thereby causing Party B loss. A misrepresentation not made by Party A nor by his agent, but of which Party A has notice can also give rise to a claim.

Whether a representation has been made is to be assessed objectively, according to the impact that the statement may be expected to have on a reasonable person in the position and with the known characteristics of the actual representee (MCI WorldCom International Inc v Primus Telecommunications Inc [2004] EWCA Civ 957).

1. Types of representee

Typically, there are three types of representees (person to whom a prepresentation is made) (see Chitty on Contracts, Volume 1 (Sweet and Maxwell, 31st ed, 2012, Chapter 6, paragraph 6-031)):

• Persons to whom a representation is made directly and their principals.

• Persons to whom the representor intended or expected the representation to be passed on.

• Members of a class at which the representation was directed.

In Gross v Hillman [1970] Ch 445, the Court of Appeal held that a representation does not "run with the land". Accordingly, a subsequent purchaser of land cannot generally rely on a representation made by an estate agent to the original purchaser. The subsequent purchaser will not be considered a representee of the original vendor. However, this principle has its limitations. For example, when a false representation is made in a document and the representor knows that it will be passed on and relied on by other people, any person who does in fact rely on it will be a representee (OMV Petrom SA v Glencore International AG [2015] EWHC 666 (Comm)).

2. Misrepresentation of law

In the past, an action for misrepresentation could only be brought in respect of a misrepresentation of fact, but the High Court has now ruled that an action can lie for a misrepresentation of law, for example, where a party misrepresents the true legal character of a document (Pankhania and another v London Borough of Hackney [2002] EWHC 2441 (Ch).

3. Statement of opinion

A mere statement of opinion, rather than fact or law, which proves to be unfounded, will not be treated as a misrepresentation unless the opinion amounts to a statement of fact and it can be proved that the person who gave it, did not hold it, or could not reasonably have held it. Similarly, a mere statement of intention, subsequently not acted upon, is also not a misrepresentation.

In Royal Bank of Scotland plc v Chandra and another [2011] EWCA Civ 192, the Court of Appeal held that a husband's over-optimistic assessment of a business venture did not amount to a misrepresentation entitling his wife to have a guarantee she had given of certain liabilities of that venture set aside. Such assessments of personal business ventures are likely to be common.