Skip to main content

Misrepresentation in Contract

 MISREPRESENTATION

By: Robin Pandey                                                                                                  Date: 27/02/2022

Statements of facts made during preliminary bargaining to induce the other to enter into a contract may be mere representation not intended to be terms of the contract. On the other hand, misleading statements of facts made during preliminary bargaining may be intended to form part of the contract. A false misleading representation made innocently e.g. without an intention o deceive the other party, Is known as misrepresentation

According to Section 18 "misrepresentation" means and includes

(1) The positive assertion, in a manner not warranted by the information 1) of the person making it, of that which is not true, though he believes it 1o be true; 

(2) Any breach of duty which, without an intent to deceive. gains an advantage to the person committing it, or any one claiming under him, by misleading another to his prejudice or to the prejudice. of him, any one claiming under him:

(3) Causing, however innocently, a party to an agreement to make a mistake as to the substance of the thing which is the subject of the agreement.

The main difference between fraud and misrepresentation is that in the case of fraud the person making the suggestion does not believe it to be true and in the case of misrepresentation he believes it to be true though in both cases it is a misstatement of fact which misleads.

Section 18 includes the following three types of misrepresentation.

1) Unwarranted statements

When a person positively asserts i.e. makes an absolute and explicit statement of fact, that a fact is true although he has not received that information from a trustworthy source, but he believes it to be true, this is misrepresentation.

In Mohanlal v. Gungagi Cotton Mills Co, A told R the plaintiff that C would be the director of a company. A had obtained this information not from C direct, but from another person called D. The information was later on found to be untrue. It was held that A was not warranted to make a positive assertion that C would be a director of the company and therefore B was entitled to avoid the contract to take shares. The High Court of Calcutta held that an assertion cannot be said to be "warranted" for his purpose when it is based upon mere hearsay

2. Breach of duty

 Any breach of duty which brings an advantage to the person committing it by misleading the other to his prejudice is a misrepresentation. Section (1)&(2) also applies to a case where a statement is true when it is made but it becomes false later on, and to the knowledge of the maker, before it has been acted upon. For example in Incledon v. Watson, (1862), A while negotiating e $ale of goodwill of a school to B, told him that there were 22 boarders. Ugh the statement was true when it was made, but before the bargain was struck. the number of boarders had fallen to 17, and this fact was known to A. However, he did not inform the fact of the number falling to B. It was held that the breach of duty entitled B to rescind the contract.

3. Inducing mistake about subject-matter 

Causing, however innocently, a party to an agreement, to make a mistake as to the substance of the thing which is the subject of the agreement is misrepresentation as per Section 18(3).

In Johnson v. Crowe, (1874), the defendant agreed to sell and deliver to the plaintiff a boiler at a certain place, the plaintiff having innocently represented to the defendant that there was a practicable road all the way. In fact, there was a suspension bridge on the way and the bridge was not strong enough to bear the weight of the boiler.

Effect of misrepresentation (Section 19)

 When consent to an agreement is caused by misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused. A party to a contract whose consent was so caused may, if he thinks fit, insist the contract shall be performed, and that he shall be put in the same position in which he would have been if the representation made had been true.

Distinction between fraud and misrepresentation 

Firstly in case of misrepresentation the representation is made innocent while in case of fraud the representation is made with an intention to deceive the other party. Secondly  in general, damages cannot be claimed for misrepresentation. The contract merely becomes voidable. But fraud, in addition to rendering the contract voidable is a cause for action in tort for damages. Lastly, in case of fraud, except fraud by silence, defrauding party cannot set up the defence that the defrauded party had the means of discovering the truth or could have done so with ordinary diligence, but in case of misrepresentation it would be a good defence (See Exception to Section 19).

Loss of right to rescind the contract

 It is clear from Sections 19 and 19A that when a contract is induced by coercion, undue influence, fraud or misrepresentation, it is voidable at the option of the party whose consent was so caused. Thus the aggrieved party has the option either to avoid the contract or to affirm it. But in the following cases the aggrieved party would disable himself from rescinding the contract. 

1. When the aggrieved party affirms the contract.

 2. When reasonable time for rescission expires.

 3. When third party acquires rights in the subject-matter of the contract

 4. When restitution is not possible.


Comments

Popular posts from this blog

Section 58B of The Advocates Act - Special provision relating to certain disciplinary proceedings

 Section 58B The Advocates Act Description (1) As from the 1st day of September, 1963, every proceeding in respect of any disciplinary matter in relation to an existing advocate of a High Court shall, save as provided in the first proviso to sub-section (2), be disposed of by the State Bar Council in relation to that High Court, as if the existing advocate had been enrolled as an advocate on its roll. (2) If immediately before the said date, there is any proceeding in respect of any disciplinary matter in relation to an existing advocate pending before any High Court under the Indian Bar Councils Act, 1926 (38 of 1926), such proceeding shall stand transferred to the State Bar Council in relation to that High Court, as if it were a proceeding pending before the corresponding Bar Council under clause (c) of sub-section (1) of section 56: Provided that where in respect of any such proceeding the High Court has received the finding of a Tribunal constituted under section 11 of the Indian B

Case Laws related to Defamation in favour of ClaimantCase Laws related to Defamation in favour of Claimant. TOLLEY Vs, J.S FRY & SONS LTD – (1931) Facts The defendants were owners of chocolate manufacturing company. They advertised their products with a caricature of the claimant, who was a prominent amateur golfer, showing him with the defendants’ chocolate in his pocket while playing golf. The advertisement compared the excellence of the chocolate to the excellence of the claimant’s drive. The claimant did not consent to or knew about the advertisement. Issue The claimant alleged that the advertisement suggested that he agreed to his portrait being used for commercial purposes and for financial gain. He further claimed that the use of his image made him look like someone who prostituted his reputation for advertising purposes and was thus unworthy of his status. At trial, several golfers gave evidence to the effect that if an amateur sold himself for advertisement, he no longer maintained his amateur status and might be asked to resign from his respective club. Furthermore, there was evidence that the possible adverse effects of the caricature on the claimant’s reputation were brought to the defendants’ attention. The trial judge found that the caricature could have a defamatory meaning. The jury then found in favor of the claimant. Held The House of Lords held that in the circumstances of this case – as explained by the facts – the caricature was capable of constituting defamation. In other words, the publication could have the meaning alleged by the claimant. The Lords also ordered a new trial limited to the assessment of damages. NEWSTEAD V LANDON EXPRESS NEWSPAPER LTD, (1939) Facts: A newspaper published a defamatory article about Harold Newstead. However, another person with this name brought an action in libel. He claimed that the article had been misunderstood as leading to him. The defendant newspaper recognised that they published the article. Also, they denied that they had the intention of being defamatory of him. Consequently, the claimant argued that the newspaper was under a duty. The duty was to give a clear and complete description of the correct person. Moreover, the claimant argued that the defendants were in breach of the duty. Issues: The issue in Newstead v London Express Newspaper, was if the reasonable persons would have understood the words complained of to refer to the plaintiff. Held: The Court of Appeal stated that in accordance with the current law on libel, liability for libel does not depend on the intention of the defamer; but on the fact of the defamation. Accordingly, a reasonable man, in this case a newspaper publisher, must be aware of the possibility of individuals with the same name and must assume that the words published will be read by a reasonable man with reasonable care.

  Case Laws related to Defamation in favour of Claimant.  TOLLEY  Vs,  J.S FRY & SONS LTD – (1931) Facts The defendants were owners of chocolate manufacturing company. They advertised their products with a caricature of the claimant, who was a prominent amateur golfer, showing him with the defendants’ chocolate in his pocket while playing golf. The advertisement compared the excellence of the chocolate to the excellence of the claimant’s drive. The claimant did not consent to or knew about the advertisement.   Issue The claimant alleged that the advertisement suggested that he agreed to his portrait being used for commercial purposes and for financial gain. He further claimed that the use of his image made him look like someone who prostituted his reputation for advertising purposes and was thus unworthy of his status. At trial, several golfers gave evidence to the effect that if an amateur sold himself for advertisement, he no longer maintained his amateur status and might be aske

Rules as to delivery of goods

                             Rules as to delivery of goods Section 2(2) of Sale of Goods Act defines ‘delivery’ as a ‘voluntary transfer of possession from one person to another.’ Thus, if the transfer of goods is not voluntary and is taken by theft, by fraud, or by force, then there is no ‘delivery. Moreover, the ‘delivery’ should have the effect of putting the goods in possession of the buyer. The essence of the delivery is a voluntary transfer of possession of goods from one person to another. There is no delivery of goods where they are obtained at pistol point or theft. 1. Mode of Delivery: According to Section 33, delivery of goods sold may be made by doing anything which the parties agree shall be treated as delivery or which has the effect of putting the goods in the possession of the buyer or of any person authorized to hold them on his behalf. Delivery of goods may be actual, symbolic or constructive. 2. Expenses of Delivery: According to Section 36(5), unless otherwise agree