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A representation is a statement made by one party to the other, before or at the time of contracting, about an existing pr past fact which induces the other party to enter into the contract.

Types of Representation


Term of the contract

Mere representation


A misrepresentation is a representation that is untrue.

The remedy of the misrepresentation depends on whether it is a condition, warranty or an intermediate term.

2 Stages:

Need to prove it is a misrepresentation

What type of misrepresentation?

Types of Misrepresentation




Elements of Misrepresentation

Representation must be made by one party to another

Representation must be a statement of fact

Representation must be false

Representation was made to be acted upon

Representation must have induced the contract

Element 1: Representation must be made by one party to another

General Rule

There is no duty to advise the other party all that you know about the subject matter of the contract, as there is a presumed equality of bargaining power. Silence is not representation.

Keates v Lord Cadogan (1851) 10 CB 591

Landlord advertised premises for rent. The plaintiff moved in and realised that it was in a terrible condition à uninhabitable.

However, the court held that the landlord did not have an obligation to tell a prospective tenant about the tenancy.

Spooner v Eustace [1963] NZLR 913

Vendor selling land and house knew that the outside stairway encroached on the neighbour’s land. Purchaser realises and wants to get out of the contract.

Court held that the vendor did not have to tell the purchaser and that silence is not representation.

Idea of caveat emptor (let the buyer beware) à purchaser should have done their own research.


Duty to reveal if change makes representation untrue

The representor becomes aware that the statement is no longer true and therefore must take the necessary steps to correct it.

Davies v London and Provincial Marine Insurance Co (1878) 8 Ch D 469

Company doing an audit realised money was missing and accused on the employees and threatened to press charges.

Friends of the employee agreed to repay the money to the company.

Company then realised that it wasn’t that employee, however still accepted the money from the friends. They found out and demanded the money back.

Court held that they could not rely on the silence rule and had to return the money.

With v O’Flanagan [1936] Ch 575

Doctor was selling a medical practice à good-will and client list.

However, the months before the sale, the doctor was ill and could not see his patients therefore they all stopped going to him.

New doctor bought the practice and wanted to get out of the contract.

Court held that the doctor had the duty to disclose this information because the statement made in January was true, however this had changed in May (by the time the practice was sold)

Half Truths

The distortion of positive representations where the representor states some facts and omits others. If the true part is held to be the whole truth then this is misleading and the representation may constitute operative misrepresentation in favour of the representor.

Dimmock v Hallett (1866) LR 2 Ch App 21

Vendor was selling a farm and told the purchaser that there were tenants and they were paying a certain amount in rent.

This was half-true as there were tenants but they all wanted to move out and the rent amount was less than that which he stated.

Court held that silence did not apply as the vendor had the duty to tell the whole truth.

Jennings v Zihali-Kiss (1972) 2 SASR 493

House and 5 flats were for sale.

Purchaser buys it and realises that the flats at the back did not have council approval to have stoves and cooking facilities as they were suppose to be boarding houses à the vendor had illegally placed the stoves into the houses

Court held that silence had made the representation misleading.

R v Kylsant [1932] 1 KB 442

In a company’s prospectus, it stated that its shares paid out dividends in the past 6 years.

However, this payment was out of capital and not out of profits. Therefore, the representation was misleading.

Active Concealment

Situation where the representor actively conceals from the representee the truth about a crucial fact.

Schneider v Heath (1813) 170 ER 1462

Contract for the sale of a boat stated that it was “without faults”

However, when purchasing, the purchaser could not look at the hull and keel as it was on the water.

It was later revealed that the boat had a broken keel and a rotten hull and that the vendor had tried to conceal this by placing the boat on the water.

Court held that this was a misrepresentation (fraudulent)

Where full disclosure is required (uberrimae fidei)

Contracts where the parties are under an obligation to disclose all relevant facts, so that any non-disclosure by one party may give rise to a right of recision by the other party. Obligation arises in situations where only one of the parties possess full knowledge of the material facts and, as a consequence must display utmost faith in revealing them.

Insurance contracts

Buying shares

Buying into a partnership

Fiduciary Relationships

Applies to situations were the parties contract to share a confidential relationship, and where the law imposes a duty to disclose to each other any material facts of which they are aware.

Solicitor & client

Trustee & beneficiary

Statutory duty of disclosure

Domestic conveyancing

Element 2: Representation must be a statement of fact

The representation must be of a past or present fact.

No future intention à except where there is no present intention as to future act.

Opinions or intention are not representations.

Sale ‘puff’ must be distinguished from statement of facts

Statement of past/present fact, not future intention

Beattie v Lord Edbury (1872) 7 Ch App 777

Representation of the future cannot be either true or false, as at the time of the statement, you need to be able to tell if it is true or false. Therefore, future representations are not possible.

Civil Service Co-operative Society of Victoria v Blyth (1914) 17 CLR 601

Employees placed money in the bank under the impression that they will be always be able to pull their money out à the bank had the power to suspend withdrawals, however assured customers that they will not exercise this power.

The bank closed and they were unable to withdraw their savings.

The court held that this wasn’t a misrepresentation of fact but rather a representation of an intention made at the time.

Edgington v Fitzmaurice (1885) 29 Ch D 459

The plaintiff claimed that he had been induced to invest in a company by the prospectus issued by the directors. The prospectus issued that the funds would be used for capital and trade improvement.

However, the directors had always intended to use it to discharge existing debts.

The court held that while the statement appeared to be one of future intention, at the time it was a misrepresentation  because the directors had never intended to use it for that purpose stated.

British Airways v Taylor (1976) 1 All ER 65

The defendant airline which had booked a plane was prosecuted for making a false statement to the availability of seats.

In its defence it stated that the statement was of future intention.

The court held that the statement was a representation by the defendant that at the time of the booking there were vacancies on the plane. In other words, it was a statement of present fact.

Trade Practices Act ss 52 and 53/Fair Trading Act s41 à Representation as to future matters made without reasonable grounds are now actionable as ‘false and misleading’.

Statement of fact, not opinion.

An opinion is only a statement of belief based on the grounds incapable of proof.

Statement of opinion cannot find an action in misrepresentation unless the representor warrants the truth of it.

The representee can choose to verify the statement or not and the latter is done entirely at the representee’s own risk

Court may be prepared to hold the statement as one of fact, rather than opinion, if it can be proved that in relation to the opinion stated, either:

The representor did not actually hold the opinion stated

The opinion was based on facts of which only the representor knew, and about which the representee had no knowledge.

No reasonable person would ever have held that opinion

Representor implied that they knew the facts justifying that opinion

Bisset v Wilkinson [1927] AC 177

The defendant, while negotiating to sell his farm, stated that it would probably hold 2000 head of sheep, although he held cows. The plaintiff realised that it did not hold near that amount and sued.

The court held that this was an honest opinion as the farmer had no expertise in the area of sheep and that the purchaser could have investigated this claim.

Smith v Land and House Property Corporation

Purchaser agreed to buy a hotel that was let to “a most desirable tenant…” However, the tenant’s company was in liquidation and he was behind in rent.

Court held that the facts about the true desirability of the tenant were within the knowledge of the seller “such as to render that opinion reasonable”.

Statement was not a guarantee that the tenant would go on paying rent but rather an assertion that nothing had occurred in relations between landlord and tenant which could be considered as making the tenant unsatisfactory.

Statement of Fact not law

Parties of a contract are assumed to know the law

Beattie v Lord Edbury (1872) 7 Ch App 777

Clear distinction between representation of fact and representation of things to do in the future.

At the time it is made, a person can ascertain whether it is true or false

David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353

High Court held that any previous distinction between mistake of fact or law no longer applied.

In view of this decision, it is arguable that the traditional distinction between misrepresentations of fact and law is not relevant to the high court, which in future decision may emphasis whether it was reasonable for the representee to rely upon what the representor said, and whether the representee was deceived as a result of his or her reliance.


Prove representor never held that opinion

No reasonable person would have held that opinion

Representor implied that he knew the facts, justifying the opinion

Representor was in a stronger position to know the facts

Element 3: Representation must be false

The untruthfulness of the representation has to be proved by the facts of each situation.

Krakowski v Eurolynk Properties Ltd (1995) 130 ALR 1

Element 4: Representation was made to be acted upon

The element requires that the representation must have been intended by the representor to be acted upon by the representee

Peek v Gurney (1873) LR 6 HL 377

The plaintiff purchased existing shares in the defendant’s company several months after it had issued a favourable prospectus inviting new share applications to the public. In reality the prospectus contained some untrue statements.

Plaintiff sued claiming that the statements were fraudulent misrepresentations

Court disagreed and held that the purpose of the prospectus was to induce people to buy new shares but the plaintiff however had purchased existing shares.

This element will stand true if:

The representee is a member of a class

Andrews v Mockford [1896] 1 QB 372

Purchaser buys shares after a prospectus is released.

The purchaser was able to show that the purpose of the prospectus was not to make buyers buy new shares, but was an advertising scam to promote existing company shares.

This was therefore held to be a misrepresentation.

Representor knows that the representation is likely to be passed onto the ultimate representee

The representation that induces the contract need not be directly made to the representee

A party may qualify as a representee if it can be demonstrated that the representor made the statement with the intention, or with the knowledge that it would be passed on.

Pilmore v Hood (1838) 132 ER 1042

The vendor was selling a pub and said that it makes 180 pounds a month. The intended purchaser realises he cannot finance the purchase therefore his nominee buys the pub and realises that it makes nowhere near this amount.

The court held that although the nominee was not the targeted party, the vendor knew that the representation was going to be passed on.

Element 5: Representation must induce the contract

The representation must actually induce the representee to enter into the contract

The representation need not be the sole inducement, provided it is one of the factors that influenced the representee to enter into the contract

It is not relevant that the representee had the means of discovering the real situation and failed to take up that opportunity

Partial inducement sufficient

Attwood v Small (1840) 6 Cl and Fin 232

Vendor sells a mine and makes a representation as to the capacity of the mine. Purchaser receives independent advice, a test was done and it was favourable

However, he came to realise that the capacity stated was wrong and sues the vendor.

The court held that the plaintiff did not rely on the vendor’s statement but sought out independent advice. Therefore, the plaintiff was unable to prove that the representation has actually induced the contract.

Only actual knowledge of falsity of representation bars inducement

Redgrave v Hurd (1881) 20 Ch D1

Purchaser claimed they were induced to purchase the vendor’s legal practice as plaintiff grossly overstated his yearly earnings. When discrepancy arose, the purchaser was given the opportunity to view the financial papers and refused.

The court held that this failure to view the financial papers was not a relevant factor. Unless there are exceptional circumstances that would make the representee highly suspicious, the representation once made relieves the representee from an investigation of it, even if the opportunity is afforded.

Gould v Vaggelas (1985) 157 CLR 215

Need to prove that the representation was one of the reasons in which you entered into the contract


Representee unaware of the representation

Representee didn’t believe/seriously doubted representation but under no obligation to search out the truth

Representee didn’t rely on the representation

Effect of finding misrepresentation

If the 5 elements of misrepresentation are established, then the contract is voidable and the innocent representee generally has the right to rescind it. Depending on the type of misrepresentation, the innocent party may be entitled to claim damages.

Types of Misrepresentation




Fraudulent Misrepresentation

A fraudulent misrepresentation is a deliberate misrepresentation made by a representor who had no honest belief in the truth of the statement; or a statement made so recklessly that the statement would amount to a complete disregard of the truth, to the extent that the representor should be regarded as having acted fraudulently.

Derry v Peek (1889) 14 App Cas 337

The plaintiff bought shares in the defendant’s tramway company following a statement that the company was authorised to use steam power instead of horses. Although the company had applied for the necessary authorisation, the statement at the time was untrue as it still had not received authorisation.

The company went into liquidation after their proposal was rejected.

Court held that the company was not liable for the statement because at the time it was made, the company honestly believed that it was true.

The court was not concerned that the defendant had no reasonable grounds for belief in that statement

Elements for finding fraudulent misrepresentation

Statement made by representor to representee

Statement of fact

False statement

Representation intended to induce

Representation does induce

Representor had no honest belief in the truth

Re Hoffman; Ex parte Worrell v Schilling (1989) 85 ALR 145

Bankrupted company offers shares to employee and uses to money to pay off debts. The company goes into liquidation and the employee argues fraudulent misrepresentation

Judge said that behaviour was prima facie fraudulent.

Remedies for Fraudulent Misrepresentation



Innocent Misrepresentation

An innocent misrepresentation is an untrue representation made by a representor, who at the time of making the statement believed it to be true, or who was not negligent.

Elements for finding innocent misrepresentation

Statement made by representor to representee

Statement of fact

False statement

Representation intended to induce

Representation does induce

Had an honest belief in the truth of the statement

Remedies for Innocent Misrepresentation

Apart from raising it as a defence against specific performance, the only remedy is rescission

The right to a voidable contract, no damages are available

Negligent Misrepresentation

A negligent misrepresentation is made by a representor, who owes a duty of care to a representee, and who had acted carelessly in making the statement

Elements for finding fraudulent misrepresentation

Statement made by representor to representee

Statement of fact (can be an opinion)

False statement

Representation intended to induce (not strictly necessary)

Representation does induce (not strictly necessary)

Duty of care owed

Breach of duty of care

Loss from breach

Hedley Byrne & Co Ltd v Heller and Partners Ltd [1964] 2 NSWLR 30

First critical case for compensation and pure economic damage

Byrne advertising agency was hired by Easy Power Ltd to launch a campaign, and as the campaign would be fairly expensive, Byrne ran a credit check. Heller and Partners were Easy’s bankers and gave a good credit rating.

Easy went into liquidation and Byrne sued Heller.

However, this was not successful as they were protected by an exclusion clause.

If there had been no clause then the defendant would have been liable for the tort of negligence, in addition the court also said that they may have been liable even though there was no contractual or fiduciary relationship.

Damages in non-contractual relationship only if:

(i)  Representor has specific skill

(ii) Representor knows representee will rely on the information

Mutual Life and Citizens Assurance Co Ltd v Evatt (1970) 122 CLR 628

The following elements must be established to prove negligent misrepresentation:

The representor must be aware that “he is being trusted to give the best of his information or advice” to the representee

The subject matter of the representation, whether information or advice, is of a serious business nature

The representor must realise that the representee intends to act upon the representation

It must be reasonable, given the circumstances, for the representee to rely on the representation

Esso Petroleum Co Ltd v Mardon [1976] QB 801

D wanted to develop land and estimated a figure that will place the pumps in the front of the petrol station; however, the local council insisted that the pumps be placed at the back.

D argued that the plaintiff had the ability to give correct information but gave false information resulting in D’s loss. The court held this to be true.

L Shaddock and Associates Pty Ltd v Parramatta City Council (1981) 150 CLR 225

The plaintiff proposed to buy land for commercial redevelopment. Before the purchase contract was exchanged, the plaintiff’s solicitor applied for a zoning certificate and road widening inquiry from the defendant.

The defendant was to endorse the zoning certificate as to the existence of any road widening proposals notwithstanding that it had no legal duty to give such information and did not charge a fee. The certificate sent contained no mention of road widening therefore the plaintiff went ahead with the purchase

Plaintiff, after discovering that there was road widening and sued.

Court held that Hedley Byrne Principle was not limited to representations made by business or professional persons who possess the appropriate skills and competence. In determining whether there has been reasonable reliance by the representee on the statement, the court will look at:

The nature and circumstances of the statement

The skill and expertise of both parties

The foreseeability of reliance by the representor

The presence or absence of any disclaimer

San Sebastian Pty Ltd v Minister Administering the Environmental Planning and Assessment Act (1986) 162 CLR 340

Plaintiff relied on Defendant’s plans to turn Wooloomooloo into a high rise commercial CBD and bought property.

Court held that it was a completely voluntary situation and there was no absolute reliance given by the defendant. Thus it was not a negligent misrepresentation.

Remedies for misrepresentation

Defence to specific performance

Rescission of contract

Damages for fraudulent or negligent misrepresentation

Statutory Remedies

1.            Defence to Specific Performance

2.            Rescission

The object if to restore the parties to the position they were in before the contract was entered into

Rescinding a contract

Rescission takes effect from the date and time of communication by the representee to the representor. It is usually effected by actual communication, but constructive communication, as demonstrated by the actions of the parties is possible.

Simons v Zartom Investements Pty Ltd [1975} 2 NSWLR 30

Mr and Mrs P wanted to retire to a unit and the plans stated that the unit had 2 bedrooms and a lockup garage. When the units were built there was no garage, but a carport. The couple claimed false misrepresentation.

The couple were able to terminate and rescind the contract.

Car and Universal Finance Co Ltd v Caldwell [1965] 1 QB 525

Caldwell sold a Jaguar car to a criminal. Before the defendant discovered that the cheque had been dishonoured, Norris had already sold the car to a motor deal, who in turn had sold it in good faith to Finance.

In the litigation, Finance argued that the Defendant had not given express notice to the criminal to rescind the contract therefore Norris had good title to sell the car.

It was argued that actual communication was not possible as Norris had absconded and in any event, constructive notice could be implied by notifying the police and the Automobile Association.

The court held that Finance did not get good title to the car because the actions of Caldwell were sufficient to constitute a valid rescission.

Rescission if representation a term

A representee can generally elect to rescind a contract notwithstanding that the representation became a term of the contract. A representee cannot, however, simultaneously seek rescission for misrepresentation and sue for damages for a breach of a term of a contract.

Alati v Kruger (1955) HC

The representee “has a choice…he might sue for damages for breach of warranty, for the statement formed one of the terms of the contract and was not only a representation” but the representee cannot do both.

The representee might be able to sue for damages in tort in either fraud or negligence, depending on how the representation is construed.

Limitations on Rescission

There are 5 instances where the representee’s rights to rescind a contract may be lost:

The representee has affirmed the contract

Restitution is impossible

An innocent third party has acquired an interest in the subject matter of the contract prior to the purported rescission

There has been a lapse of time (delay)

The contract has been executed


If a representee elects to affirm a contract, with full knowledge of the facts, the representee cannot subsequently seek to avoid it. Once made, affirmation cannot be altered. This can be express or implied and the right to rescind if not lost if the representee did not know that there was such a right.

Long v Lloyd [1958] 2 All ER 402

Plaintiff read an advertisement placed by the defendant for the sale of a lorry in exceptional condition. The defendant later repeated the representation in person and offered the plaintiff a test drive, followed by further representation by the defendant as to speed capability and fuel economy.

The lorry, after purchase, performed badly and the defendant offered to contribute to repair costs. Shortly after the lorry broke down and the plaintiff sought to rescind the contract for misrepresentation.

Court held that while the test drive did not amount to affirmation, his subsequent conduct extinguished any right to rescind.

Coastal Estates Pty Ltd v Melevende [1965] VR 433

The plaintiff induced by fraudulent misrepresentation to purchase land from the defendant. The contract provided for payment by instalments. A few months later the plaintiff sought to renegotiate and another 18 months elapsed before the plaintiff received advice from a solicitor that he had the right to rescind. During that time he met all payments but never had possession of property.

Court held that the making the payments was not an affirmation as he was unaware of his right to rescind.

Restitution impossible

Given that the object of rescission is to restore the parties to their pre-contract positions, an order for rescission was refused at common law if precise restoration was not possible.

Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218

Party selling a mine withheld some information

Former owner argued that they could not rescind because restitution was impossible as the mine had already been worked on

HOL said they were trying to hide issues from the purchaser and the lapse of time was short therefore restitution is possible after profits are accounted for. Therefore, the new owner was returned to their pre-contract position.

Alati v Kruger (1955) 94 CLR 216

P bought a fruit store including stock following a representation that a certain amount was made each week. However, it was discovered that this was a fraudulent misrepresentation. By the time the case reached court, the business had closed and the landlord had re-entered business.

While precise restitution was not possible, the court held that the parties could be restored substantially to the status quo by exercise of equitable power.

Third party rights

The right of rescission by the representee may be lost if an innocent third party has acquired a right in the subject matter of the contract. The third party must have acquired the interest in good faith, without notice of the defective ownership and for valuable consideration.

Phillips v Brooks Ltd [1919] 2 KB 243

Jeweller sold jewellery to a rogue and realised that he had been duped. The rogue had, in the meantime, sold it to a third party.

Jeweller was unable to rescind the contract because the third party was an innocent party.

Lewis v Avery [1972] 1 QB 198

Car dealer sold a car to a criminal and it was sold to a third party.

Same decision as Phillips v Brooks

Lapse of Time

Any delay in seeking rescission is relevant in either the following situations:

An inordinate period of time elapses between the making of the statement and the purported rescission; or

After becoming aware of the misrepresentation, the representee wastes considerable time before seeking to rescind.

Leaf v International Galleries [1950] 2 KB 86

The plaintiff was induced to purchase from the defendant after it had been innocently misrepresented as an original painting.

5 years later the plaintiff sought to rescind the contract but the court refused, given the lengthy period of time between the purchase and the purported rescission. The court held that the plaintiff had ample time to check the authenticity of the painting.

Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218

Mine case. The date between the sale and the rescission was 14 months.

It was held that the shareholders took the appropriate action of selecting new directors, even though it took time.

Executed Contracts

Rescission may be refused if a contract, which was induced by an innocent misrepresentation (and not a fraudulent or negligent misrepresentation), has been executed.

Seddon v North Eastern Salt Co [1905] 1 Ch 326

The plaintiff purchased shares in a company following an alleged innocent misrepresentation by the defendant.

The court refused to allow rescission because the contract has been fully executed – the shares had been transferred to the plaintiff and duly registered.

Svanosio v McNamara (1956) 96 CLR 186

Land case where title had already passed

Court held that this was too late as the contract had already been executed

Wilde v Gibson (1848) (HL)

Land case

Lord Campbell:

“Where a conveyance has been executed…a court of equity will set [it] aside only on the ground of actual fraud”

Subsequent decisions have modified or distinguished the rule in the Seddon case. It has been criticised because the contract subject were shares, it was deemed too harsh. In the land cases this was reasonable because since land is such an important area, the courts assume that checks should have been made.

Criticisms of Seddon include:

Leaf v International Galleries [1950] 2 KB 86 (Denning)

Leason Pty Ltd v Princes Farm Pty Ltd (1983) (NSW)

A race horse was bought based on its father. The plaintiff was able to successfully rescind the contract although it had been executed.

It was said that the rule should only apply to land sitatuons.

Helsham CJ in equity stated that the rule was said by way of obiter, and therefore its application was open to question.

However, in Vimig Pty Ltd v Contract Tooling Pty Ltd (1987) NSW, Wood J suggested, also by way of obiter, that the rule in Seddon was applicable in Australia, notwithstanding the view expressed in the Leason case.

The case was the sale of a business and a misrepresentation to the takings.

Debateable as there is still no HC decision on Seddon.

3.            Damages

Fraudulent & Negligent Misrepresentation

Voidable à choice by the innocent party to terminate or affirm

Damages for tort of negligence

Toteff v Antonas (1952) 87 CLR 647

Selling of a business, purchaser opens up the business and realises the representation as to the takings were untrue.

Court said that the appropriate damages were an ‘out of pocket expense’.

Doyle v Olby (Ironmongers) Ltd [1969] 2 QB 158

Damages to compensate the innocent party for the amount they are worse off for having entered into the contract

Opposite of contractual damages

Marks v GIO Holdings Ltd (1998) 158 ALR 333

Court emphasises that they are not talking about loss expectation or expected profits

This case confirms this.