3rd June 2021
When parties consider doing business together, a multitude of enquiries, discussions and negotiations take place before any deal is done. Marketing campaigns and promotional offers and communications have often been undertaken and information has been displayed online prior to the contemplation of any particular enquiries or leads. As part of the entire pre-contract process, myriad representations are made, many of which could give rise to liability.
However, the law of misrepresentation is not straightforward – it comprises elements of common law, equity and statute ; it includes characteristics of both contract law and tort; and it is developing all the time.
To avoid inadvertently leaving your business open to legal challenge, therefore, it is important for any business to keep up to date with the law of misrepresentation, and to understand what remedies might flow when a misrepresentation occurs.
A misrepresentation is:
By way of example, consider the following real-life scenario. A patient required cosmetic surgery after being involved in a serious accident. Having read a manufacturer’s brochure given to her by her doctor, the patient decided to go ahead with treatment involving a cosmetic product described in that brochure. The brochure stated that the product, which would be administered by injection, included only the patient’s own skin cells. That was not true – the product also included some foetal calf serum (“FCS”). Post-treatment, the patient (a vegan) discovered that the product had contained FCS. The manufacturer had made an express written representation. The doctor had made an implied representation that the brochure was correct by handing it over without a disclaimer. The patient could therefore sue either or both the manufacturer and the doctor in misrepresentation.
Another very common real-life occurrence of misrepresentation is where replies are given to enquiries in a conveyancing transaction, but they are not then updated when circumstances change prior to completion.
The fact that ‘awareness’ of a representation is an essential pre-requisite of a misrepresentation claim has, for some time, been the subject of debate. The 2021 case of Leeds City Council & Ors v Barclays Bank plc  has now clarified that representee claimants must be able to prove their awareness of the representation having been made (that is, the representation had to have been actively present in their mind) at the point of being induced to enter the contract. Importantly, the case confirmed that it is not sufficient to rely on an assumption about the representation in question, to found a claim.
There are three different types of misrepresentation, each giving rise to different remedies for the party who has suffered loss. Fraudulent misrepresentation; negligent misrepresentation; and innocent misrepresentation:
The recent case of Glossop Cartons and Print Ltd v Contact (Print & Packaging) Ltd & Ors  has confirmed that calculation of loss for fraudulent misrepresentation requires the court to ascertain the actual value of assets purchased at the relevant date and to deduct that figure from the price paid. Any subjective commercial judgments (or misjudgements!) made by the purchaser are irrelevant and should not be taken into account. That means that, unusually within commercial law, a fraudulent misrepresentation claimant can be compensated for making a bad bargain.
When it comes to misrepresentation liability, there are a number of practical points and best-practice tips of which all businesses should be aware.
For further advice, assistance and/or staff training on misrepresentation, and/or for tailored advice upon contractual protections such as exclusion, non-reliance or entire agreement provisions, please do not hesitate to contact Gwendoline Davies, Nick Lees, Nick McQueen or any member of Walker Morris’ Commercial Dispute Resolution team.
 the Misrepresentation Act 1967 (MA)
  EWHC 363 (Comm). The case arose from the LIBOR rigging scandal. The claimants alleged that the bank had made implied fraudulent representations that LIBOR was set honestly and properly and that the bank had not engaged, and had no intention of engaging, in improper conduct in connection with LIBOR. The High Court concluded that, to say that key people within the claimant assumed that LIBOR would be set in a straightforward and proper manner was simply not enough. The representation in question had to be actively present in the claimant’s mind in order for it to be relied upon at the point of the claimant being induced to enter the contract.
  EWCA Civ 639
 with the caveat that liability cannot be excluded for fraudulent misrepresentation