It is oftentimes the case that deceit or negligent misstatement can be made to parties in relation to property. These can cause very serious financial losss.
A contract is voidable (rescinded at the option of the Claimant) where a party to the contract entered into it in reliance on a misrepresentation. Such misrepresentation may be fraudulent, negligent or innocent. It may be made by a contracting party or in some circumstances by a third party.
This note will not deal with recission which may be available for such misrepresentations where there a contract between the parties. However, it is important to say that a Claimant in such position may additionally or alternatively have a common law claim for damages for the tort of deceit or negligent misstatement. This is the focus of this brief note. There is no inherent conflict between damages claims based in tort and rescission - the damages are not for breach of contract as they are for inducing the party into the contract in the first place.
Professor Burrows, in The Restatement of The Law of English Contract Law, has set out a useful summary in relation to possible avenues of attack for a Claimant to obtain damages:
“A Claimant who has relied on a misrepresentation in entering into a contract has right to damage from the person by whom the misrepresentation was made (“the misrepresentator”):
(a) for the tort of deceit where the misrepresentation was fraudulent;
(b) for the tort of negligence where the misrepresentation was negligent and there a duty of care owed by the misrepresentor to the Claimant
(c) under the s.2(1) of the Misrepresentation act 1967 provided that:
(ii) the misrepresentator was a party to the contract fails to prove that it has reasonable grounds to believe and did believe up to the time the contract was made that the representation was true.”
It is by no means always the case that the victim of a misrepresentation is induced into entering into a contract with maker of the false statement. For example:
· A planning authority falsely informing a property-owner that substantial and expensive works were required as a matter of law.
- In Osteopathic Education and Research Ltd v Purfleet Office Systems Ltd [2010] EWHC 1801 (QB), the Defendant had fraudulently persuaded the Claimant to enter into a series of leasing contracts with third party finance houses. It was those leases which caused the Claimant’s loss (and the Defendant’s profits).
- Another example would be the case of Lara Tate v L & Q Housing (https://www.theguardian.com/society/2020/dec/19/housing-association-pays-tenant-31000-over-neighbours-racism)
In cases of this sort, the torts of negligent misstatement or deceit (fraudulent misstatement) may be the only remedy.
Employers will be responsible for negligent representations made by their employees in the course of their employment in the normal way. There is also liability for the tort of deceit committed by an employee in the course of his employment in circumstances where the employee had “actual or ostensible authority to make it”: Armagas Ltd v Mundogas SA [1986] AC 717. It is not possible to exclude liability for deceit.
Estate Agents notoriously attempt to exclude liability for representations made in Sales Particulars, this may or may not be effective where a representation has been specifically authorised: Museprime Properties Ltd v Adhill Properties Ltd [1990] 36 E.G. 114 (auctioneer specifically authorised to read out “corrections” to auction particulars which in fact misstated the state of play on rent review negotiations with tenants).