In Part One of our Article on Misrepresentation, we explained how a misrepresentation is an untrue statement of fact, or law, made by Party A to Party B, which ‘induces’ (is of real and substantial relevance in persuading) Party B to enter into a contract causing Party B to suffer a loss. We then proceeded to detail the respective elements of each type of misrepresentation claim that Party B may be entitled to pursue, as well as other related potential claims.
But now we get to what really matters for your bottom line, the losses that you can recover if you have been on the receiving end of a misrepresentation.
The Damages that can be Awarded to You
If a fraudulent misrepresentation is proved at trial, then you may be entitled to:
- ‘Tortious’ Damages – These are awarded with the aim of placing Party B in the position they would have been in if Party A had not made the misrepresentation. Where there is a fraudulent misrepresentation, Party B’s losses do not need to be foreseeable by Party A.
- ‘Rescission’ – The contract is not recognised as legally binding (i.e. it is as if the contract was never entered into by Party B in the first place).
If a negligent misrepresentation is proved at trial, then you may be entitled to:
- ‘Tortious’ Damages – These are awarded with the aim of placing Party B in the position they would have been in if Party A had not made the misrepresentation. Where there is a negligent misrepresentation, Party B’s losses do not need to be foreseeable by Party A.
- ‘Rescission’ – The contract is not recognised as legally binding (i.e. it is as if the contract was never entered into by Party B in the first place).
- ‘Damages in lieu (instead of) of rescission’.
If an innocent misrepresentation is proved at trial, then you may be entitled to:
- ‘Rescission’ – The contract is not recognised as legally binding (i.e. it is as if the contract was never entered into by Party B in the first place).
- ‘Damages in lieu (instead of) of rescission’.
Damages in lieu of rescission arise from s.2(2) of the Misrepresentation Act 1967 and, in effect, allow the Court to hold that:
- By reason of the misrepresentation, the requisite contract ought to have been rescinded; but nonetheless
- The contract should continue; and
- Damages should be awarded to Party B on account of the loss suffered by Party B in continuing with the contract. However, be warned, this remedy is very much at the Court’s discretion and will also account for the loss that Party A would suffer from the contract being rescinded.
If a breach of contract is proved at trial, then you may be entitled to:
- ‘Contractual Damages’ – These are awarded with the aim of placing Party B in the position they would have been in if no breach of contract had occurred (i.e. had the representation by Party A been true and the contract fully performed).
If a negligent misstatement is proved at trial, then you may be entitled to:
- ‘Tortious’ Damages – These are awarded with the aim of placing Party B in the position they would have been in if Party A had not made the misrepresentation. However, with a negligent misstatement, Party B’s losses must be foreseeable by Party A.
Exemption Clauses
Finally, it is commonplace for ‘boiler-plate’ provisions to be included in any contract with some such clauses seeking to limit the ability of Party B to make a claim for a negligent or innocent misrepresentation (but not for a fraudulent misrepresentation, as this cannot be excluded).
Such clauses should be carefully reviewed, as they may defeat any claim that Party B may have. Yet even if such a clause is found, if it is not reasonable (as would be determined in accordance with the Unfair Contract Terms Act 1977), or is badly drafted, then this clause may not be legally enforceable.
As with any aspect of a legal claim, it is always advisable to take legal advice on such a clause.
Next Steps
We hope that our Two-Part Article has helped explain what a misrepresentation is, whether you may have suffered as a result of such a statement (be it innocent, negligent or fraudulent) and the remedies that may be available to you in pursuing a claim for misrepresentation.
If you have concerns which you would like to discuss with us in more detail, or should you wish to understand any possible remedies that may be available to you, then please get in touch with us at daviddavies@cardiumlaw.com or call +44 (0)74 6420 7454.
