MISREPRESENTATION IN A NUTSHELL

DEFINITION: False statement made by the other contractant which motivated a

prospective party to conclude the contract.

REQUIREMENTS / ELEMENTS

1. Act (conduct)

There must be a misrepresentation made by a contractant or someone for whose

acts he can be held liable.

A representation is any conduct which create aparticular impression in the mind of

the other contractant.

The representation may be made verbally, by conduct or even by silence, e.g. by

refraining to remove a wrong impression in circumstances where there is a duty to
disclose the truth.

2. Wrongfulness

The act must be wrongful. In other words it must be contra boni mores, or contrary to
the norm of acceptable conduct in a particular society.

An expression of opinion, speculation or prophecy concerning the future which turns

out to be mistaken is not a misrepresentation. If a party wants to rely on a statement
made by the other party he should protect himself by making it a term of the contract.

A misrepresentation of law does not entitle a party to any remedy. A statement of

what the law entails, is a statement of opinion.

Puffing or commendation has no effect on the validity of the contract, while

misrepresentation justifies repudiation. See the examples in your handbook.

The misrepresentation must be material. It will be material if:

(a) it is reasonably likely to induce someone to enter into a contract or

(b) where it was made with the intention to mislead the other party and to
induce him to conclude the contract.

3. Fault

A misrepresentation can be made intentionally, negligently or innocently. Since fault

is not required it only impacts on a claim for damages damages can only be
recovered in the event of fraudulent and negligent misrepresentation and not in the
case of innocent misrepresentation.

4. Causation

The misrepresentation must induce the contract.

Factual causation is established by applying the conditio sine qua non theory.
Legal causation is determined by applying the test of forseeability.

5. Damages

When a claim for damages based on misrepresentation is brought, proof is required

that patrimonial loss has actually been suffered a result of the misrepresentation.

Where the contract is merely rescinded, it has been held that proof of damage is not
required.

REMEDIES

1. Restitution (Right to rescind)

2. Damages

In the event of fraudulent representation, as well as in the case of negligent

misrepresentation.

Damages cannot be claimed for innocent misrepresentation.