The Gazette 1982

(. \ / l 111

MARCH 1982

Contractual and Statutory Remedies for Misrepresentation

by

Brenda Hannigan, Lecturer in Law, University College Cardiff, and Alex Schuster, Lecturer in Law, Trinity College, Dublin.

P ART V of the Sale of Goods and Supply of Services Act 1980 provides statutory remedies for misrepresentation similar to those enacted in the U.K. Misrepresentation Act 1967. 1 This article examines the new revisions and makes suggestions for further reform. "Contract" Section 43 provides that "contract in this Part means a contract for the sale of goods, a hire purchase agree- ment, an agreement for the letting of goods or a con- tract for the supply of a service". There is no equivalent to this section in the English legislation which applies to all contracts. The Irish provision is limited to selected categories of contracts, the most obvious exclusion be- ing contracts relating to land and houses. Whether this is a satisfactory approach to adopt will be considered later. It will be seen that it is precisely in respect of con- tracts for the sale of land and houses that many of the difficulties have arisen, for example, in relation to misrepresentations made by auctioneers or vendors. There are, than, two branches of the law of misrepresentation, with certain contracts governed by statute while others remain subject to the common law. An important consequence of this segregation is in respect of the rule laid down in Wilde v. Gibson 2 and Seddon v. North Eastern Salt Co. 1 followed here in Lecky v. Walter\ This rule provided that there could be no rescission for innocent misrepresentation where the contract had been performed. Section 44 (b) purports to abolish the rule, but because its application is restricted by section 43, the rule will continue to apply to contracts for the sale of land and houses. Removal of certain bars to Rescission Section 44 (a) provides that where a person has entered into a contract, after a misrepresentation has become a term of that contract, then, if otherwise, he would be entitled to rescind the contract without alleg- ing fraud, he shall be so entitled. This is the equivalent of section 1 (a) of the U.K. Act. This provision covers the situation where a represen- tation actually becomes a term of the contract. It had been the case that where the representation merged in the subsequent contract, the representee is left only with such rights as may be available under that contract 5 . Section 44 (a) alters this position.

The remedies available for breach of a contractual term depend upon whether that term is a condition or a( warranty or an innominate term. Where the term broken is only a warranty, then the injured party is only entitled to damages. However, should he under this pro- vision, elect to treat the term broken as a misrepresenta- tion, he will be entitled to rescind the contract, notwith- standing the fact that the term broken is only a warran- ty. It should, however, be noted that it is a necessary re- quirement that the representee "would otherwise be en- titled to rescind". Wylie notes that this requires proof that the misrepresentation induced the contract. This, he suggests, may not be possible if the representation has been reproduced in the terms of a contract 6 . See George Wimpey & Co. v. Johrl\96llCh. 487. Another possibility is that even if the plaintiff can overcome this hurdle and seeks rescission for what is a breach of warranty under section 44 (a), the court may exercise its discretion under section 45 (2) to award damages in lieu of rescission. So the injured party may be no better off than if he had sued for breach of warranty. That is, of course, unless the measure of damages for breach of warranty and for misrepresenta- tion is different. While some cases have held that the measure of damages for non fraudulant misrepresentation should be the same as for breach of contract 7 , others have taken the view that the yardstick is that for deceit or fraud, being without the limitation as to foreseeability that applies in damages for negligence 8 . The English Law Reform Committee recognised that "some anomalies and much uncertainty result from the distinction between the legal consequences of misrepresentation and of a breach of contract. 9 Section 44 (a) abolished the artificial distinction between the in- dependent misrepresentation (which sometimes enabled the contract to be rescinded) and breach of an identical term in the contract itself (which gave only a right to damages). Although section 44 (a) narrowed the dividing line between a contractual term and an in- dependent misrepresentation, it is submitted that the mischief referred to by the Law Reform Committee will be perpetuated unless the measure of damages applied under section 45 (2) is the same as that in contract. Section 44 (b) provides that where a person has entered into a contract after a misrepresentation has been made to him and the contract has been performed

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