4. Implied representations

The court may find that a representation has been implied by an express statement. In a claim based on an implied representation, the court must consider "what a reasonable person would have inferred was being implicitly represented by the representor's words and conduct in their context" (IFE Fund SA v Goldman Sachs International [2006] EWHC 2887 (Comm)).

The decision in IFE Fund was followed in Webster and others v Liddington and others [2014] EWCA Civ 560 in which the Court of Appeal upheld a finding that doctors were liable for misrepresentations in manufacturers' brochures for cosmetic treatment that the doctors had given to prospective patients without any disclaimer.

It is necessary to consider the context in which an alleged misrepresentation was made, including the characteristics of the representee. It must also be shown that the representee both:

• Understood the statement in the sense which the court ascribes to it (Smith v Chadwick (1884) 9 App Cas 187, Arkwright v Newbold (1881) 17 Ch D 301).

• Relied on it.

In Raiffeisen Zentralbank Osterreich AG v Royal Bank of Scotland plc [2010] EWHC 1392 (Comm), in dismissing a claim for misrepresentation, the court held that it was relevant that the parties were each sophisticated, commercial parties with experience in the syndicated loans market.

It was further held that the way in which one of the alleged implied representations was pleaded was unclear and potentially extremely wide (paragraph 111). This "elasticity of possible meaning" was a factor against determining that the alleged representation had been implied. Therefore, in any claim that seeks to establish an implied misrepresentation, it is important to draft pleadings very carefully to ensure the alleged representation is clear and specific.

A misrepresentation can be implied or be a "representation by conduct" if there is representation that there exists some state of facts different from the truth. For example, in Spice Girls Ltd v Aprilia World Service BV [2002] EWCA Civ 15, it was held that a pop group had made an implied misrepresentation when they continued with arrangements to publicise the defendant's products despite knowing that one member of the group was intending to leave the group shortly, which would prevent the contract being carried out.

5. Silence

Silence does not of itself usually amount to a misrepresentation as there is generally no duty to disclose facts which if known would affect the other party’s decision to enter the contract. Exceptions to this general rule are:

• Misrepresentation by conduct (see Implied representations above)

• Where a party makes a statement which is a half-truth (that is, a statement which may be true as to what is said, but which becomes a misrepresentation by virtue of what is left unsaid). This exception often arises in practice.

• Where a party makes a statement that is true when it is made, but before the contract is made the circumstances change so that the statement is no longer true. In this situation, the party who made the statement has a duty to tell the other party about the change and failure to do so will amount to a misrepresentation.

• Where the contract is a contract of the utmost good faith or deals with certain other fiduciary relationships (examples are insurance contracts or partnership matters).

  • Insurers may avoid insurance contracts for failure by the insured to disclose material facts or misrepresentation of material facts by the insured. The test of materiality is an objective one. A court will consider whether the non-disclosed or misrepresented fact would have influenced the decision of a prudent insurer to accept the risk and on what terms.

  • There is a duty of disclosure between partners of a firm and it has been held that the duty to disclose material matters also exists when parties are negotiating to form a partnership. Non-disclosure of material facts can amount to a fraudulent misrepresentation resulting in damages (Conlon and another v Simms [2006] EWHC 401).