Misrepresentation - Types of Misrepresentation

Types of Misrepresentation

Four types of misrepresentations are identified with different remedies available:

• Fraudulent misrepresentation occurs when one makes representation with intent to deceive and with the knowledge that it is false. An action for fraudulent misrepresentation allows for a remedy of damages and rescission. One can also sue for fraudulent misrepresentation in a tort action. Fraudulent misrepresentation is capable of being made recklessly.
• Negligent misrepresentation at common law occurs when the defendant carelessly makes a representation while having no reasonable basis to believe it to be true. This type of misrepresentation is relatively new and was introduced to allow damages in situations where neither a collateral contract nor fraud is found. It was first seen in the case of Hedley Byrne v Heller A.C. 465 where the court found that a statement made negligently that was relied upon can be actionable in tort. Lord Denning in Esso Petroleum Co Ltd v Mardon Q.B. 801 however, transported the tort into contract law, stating the rule as:

if a man, who has or professes to have special knowledge or skill, makes a representation by virtue thereof to another…with the intention of inducing him to enter into a contract with him, he is under a duty to use reasonable care to see that the representation is correct, and that the advice, information or opinion is reliable

• Negligent misrepresentation under Statute, enacted by the Misrepresentation Act 1967. When dealing with a negligent misrepresentation it is most lucrative (joint with fraudulent misrepresentation, Contributory Negligence notwithstanding) for an action to be brought under statute law as the burden of proof that is required passes to the person who made the statement. So it is for the person who made the negligent statement to prove that the statement was either not one of fact but opinion and that "had reasonable ground to believe and did believe up to the time the contract was made that the facts represented were true" - the so-called innocent defence.
• Innocent misrepresentation occurs when the representor had reasonable grounds for believing that his or her false statement was true. Prior to Hedley Byrne, all misrepresentations that were not fraudulent were considered to be innocent. This type of representation primarily allows for a remedy of rescission, the purpose of which is put the parties back into a position as if the contract had never taken place. Section 2(2) Misrepresentation Act 1967, however, allows for damages to be awarded in lieu of rescission if the court deems it equitable to do so. This is judged on both the nature of the innocent misrepresentation and the losses suffered by the claimant from it.