A misrepresentation in law is a “false statement of fact” which is delivered by a seller before a contract is made. However, there are other factors which must be considered and before delivering a compensation claim under the heading of Misrepresentation.
Misrepresentation Act 1967
The first consideration is, did you believe the misrepresentation? If you didn’t believe what was said, clearly you would not have taken that statement into consideration when your behaviour changed from a position of being an unwilling, to that of a willing buyer.
Example: - “if you buy this box of pencils you will look 20 years younger”! You know this to be false and would never have relied upon the statement, thus any claim will be impaired as to a reasonable person you would not have relied upon the false statement.
If a statement was delivered and you did consider, believed and acted upon it, that in itself might not fully entitle you to compensation and for the following reason.
Example: what you must consider is, was the misrepresentation obvious to you having regard for your education, employment, environment etc? For example, if you are a banker, educated and practice banking for a living, you will know more about banking than the average man in the street. Thus, having a higher level of “knowledge” about the misrepresented subject. Were you suspicious that a misrepresentation was being delivered? Why did this not cause you to check the suspicion you had? Would checking out the representation be the act of a reasonable person,? if so, are you culpable?
The other matter is proof that your account is correct. Some report that they were told that the timeshare was an “investment” and to prove your case, you are required to persuade a court that your version of what was stated is more likely than not to be correct. As you are the claimant, you are required to prove your case accordingly and your evidence will have to be tested by a subjective objective test.
Subjective objective test
You will present your account of what was said and then the court will look at what happened. They will refer to documents and express evidence to see if your account aligns with the factual documents.
Categories of Misrepresentations
The court may require the need for you to establish what kind of misrepresentation it was (innocent, negligent, fraudulent) as this will affect your path to redress.
The general remedy for misrepresentation is cancelling or unwinding the contract, so that both parties are put back into the position they were in and before the contract/bargain was made. If the contract is unwound, damages can be available and an equitable remedy in some circumstances and in addition to, or as an alternative to unwinding the contract.
Should the contract be unwound then all other contracts and obligations which flowed from the misrepresentation are likely to be classed as 'fruits of the poisonous tree' and unwound as well (memberships of clubs and obligations to trust companies).
In many sales environment representations, as to what benefits the product will deliver (after you have paid the consideration) will be made, some will be simply sales puffery, some over-egging the pudding, some lies, misrepresentations and equally truthful statements. The task you face is sorting the wheat from the chaff which is an onerous burden having regard for your right to be told the truth. Therefore, the Misrepresentation Act came into existence to protect consumers from false or fraudulent statements that induce a consumer into buying something or entering into a contract.
You will not get an apology, or other goodies, just monitory damages.
Damages or Unwinding the Contract?
Once you case has been proven, the court satisfied that liability is proven and established, equally the type of misrepresentation will be stated so the correct remedies are determined and applied.
There are two types of remedy:
Damages in the form of financial compensation will be awarded to compensate the victim of a misrepresentation, for the harm done, insofar as money can do this.
Unwinding of the contract (the ability to terminate the contract).
The parties are treated as though the contract never existed, thus other considerations might be needed, so as to return money paid as a consequence of the misrepresented contract.
The availability of the different remedies is mostly determined by the type of misrepresentation and the stage the contract has reached when the victim discovers the misrepresentation.
A fraudulent misrepresentation occurs when someone makes a statement that they know is untrue, or they make without believing it is true, or they make recklessly (i.e. that person does not care about whether the statement is true or not).
If you enter into a contract as a result of a fraudulent misrepresentation, then you can choose to unwind the contract, claim damages, or both. You may lose your right to cancel the contract however, in certain circumstances detailed below.
A negligent misrepresentation under the Misrepresentation Act 1967 is where a statement is made carelessly (without reasonable grounds for believing it to be truthful).
When a claim for negligent misrepresentation is brought under the Act and based on negligence, the law states: - the person who made the misrepresentation is required to disprove the negligence.
In other words, the defendant must prove they did have ‘reasonable grounds’ to believe the statement, and equally believed the facts represented, were true.
There is a right of action for negligent misstatements under ‘common law’ and in addition to the rights under the Act, however the Act is often more useful for claimants because it contains wider remedies, and the ‘common law’ action requires claimants to prove a greater number of facts. That said if you make a successful claim under the Act, you will be entitled to unwind the contract and may also be entitled to damages. Also, a court might award you damages (as an alternative to unwinding the contract). Financial loss may be recovered and in some circumstances.
This is where a person makes a misrepresentation when entering into a contract, but had reasonable grounds for believing that the false statement was true. In other words, it was made entirely without fault. This type of misrepresentation chiefly allows for the contract to be cancelled. However, the court has discretion to award damages instead of allowing you to end the contract if it deems it appropriate. It is more likely than not that the court will not award both. This would be judged on both the nature of the innocent misrepresentation and the losses suffered by the victim of the misrepresentation.
Limitations of a Misrepresentation
There are certain ‘limitations’ when dealing with rights to claims. Most British consumers may understand the term as “statute of limitation” which is an American phrase. In the UK its simply called “limitation”.
The law asserts that if you have been subject to misrepresentation you have 6 years in which to make a compensatory claim. The trigger date will be that of the date you signed the contract however you may have a right to claim that the trigger date only begins when a reasonable person became aware of the misrepresentation. In those cases you will have 3 years in which to claim.
If you are aware of a misrepresentation but elect to continue with the contract either by conduct, or via express or verbal communications, you will not be able to go back to the person who made the misrepresentation and terminate the contract. Equally you will not be able to go to court and ask them to unwind the contract.
The natural understanding is that you knew that the contract was misrepresented, considered the matter and adduced that you still believed that the contract provided for a corresponding benefit for the initial consideration you paid. Accordingly, your actions could be taken as affirming or reaffirming subject to a misrepresented contract. “After discovering the truth, you nevertheless continued to use it”.