WJEC Eduqas A Level Law Book 2 sample

Contract Law 22 Fraudulent misrepresentation Where fraudulent misrepresentation is alleged, fraud must also be proved. Derry v Peak (1889) showed that, if a person makes a false statement which they do not believe to be true at the time, this is a fraudulent misrepresentation. The claimant will sue for damages under the tort of deceit. However, this case has now been overturned by statute, as codified in the Companies Act 2006 . The damages will be awarded according to the tort of deceit and are also available under s2(1) Misrepresentation Act 1967 . The equitable remedy of rescission is also available (that is, to void the contract as if it had never happened). The defendant is responsible for all losses, including any consequential loss, providing a causal link between the fraudulent misrepresentation and the claimant’s loss. Negligent misrepresentation There are three requirements: 1. The party making the statement must be in possession of the particular type of knowledge for which the advice is required. 2. There must be sufficient proximity between the two parties that it is reasonable to rely on the statement. 3. The party to whom the statement is made relies on the statement and the party making the statement is aware of that reliance. Damages will be applied according to the standard tort measure of negligence or under s2(1) Misrepresentation Act 1967 . The equitable remedy of rescission is also available. rescission: to unmake a contract or transaction, to return the parties to the position they would be in if it had never happened. KEY TERMINOLOGY Hedley Byrne v Heller & Partners (1964) An advertising agency checked a prospective client’s creditworthiness with its bank. The bank sent a letter apparently stating that the client would be safe to work with, so the agency sued the bank when it lost money after the client went into liquidation. The court held that damages may be recovered for a negligent misrepresentation where advice has been sought, a financial loss has been incurred and where there is a special relationship between the parties. KEY CASE Read Lord Denning’s judgement in Esso Petroleum Co Ltd v Mardon (1976) . Do you agree with his judgement? STRETCH AND CHALLENGE