Misrepresentation is a major doctrine affecting the validity and enforceability of contracts. It addresses situations where a party is induced to enter into a contract by a false statement made by the other party. The law intervenes to protect the integrity of consent and to prevent unfair advantage.
In Ghana, misrepresentation renders a contract voidable and not void. The aggrieved party is given the option to rescind the contract and in appropriate cases claim damages or indemnity depending on the nature of the misrepresentation.
Meaning and Distinction Between Misrepresentation and Mistake
Meaning of Mistake
A mistake refers to a false assumption held by one or both parties at the time of contracting. It concerns an incorrect belief about an existing fact or situation. Where a mistake is fundamental, the contract is treated as void because there is no true agreement between the parties.
Example: If both parties believe that a specific consignment of cocoa exists when in fact it has already been destroyed, the contract is void for common mistake.
Meaning of Misrepresentation
Misrepresentation is a false statement of fact made by one party to another before the contract is concluded, which induces the other party to enter into the contract.
Unlike mistake, misrepresentation involves communication between parties. One party makes a false statement and the other relies on it.
Effect: Misrepresentation makes the contract voidable and not void. The innocent party may choose to rescind the contract or affirm it.
Key Distinction
Mistake affects the existence of agreement itself and renders the contract void.
Misrepresentation affects the quality of consent and renders the contract voidable.
Operative Misrepresentation
Not every false statement amounts to misrepresentation in law. For a misrepresentation to be operative and legally actionable, certain requirements must be satisfied.
False Statement of Fact Made Before Contract
The statement must be false and must be made before the contract is concluded. Statements made after the contract do not amount to misrepresentation.
Illustration: If a seller falsely states that land is free from litigation before sale, the statement may be actionable. If the statement is made after the agreement, it is not misrepresentation.
Opinion or Intention as Misrepresentation
Generally, statements of opinion and intention are not actionable. However, they become misrepresentation where:
- The opinion is objectively unreasonable
- The maker possesses special knowledge or expertise
- The stated intention was never genuinely held
Bisset v Wilkinson (1927)
Facts
The seller of land in New Zealand told the buyer that if the land was properly worked, it could carry about 2,000 sheep. The land had never been used for sheep farming. The buyer knew this fact. After purchase, it became clear that the land could not sustain that number of sheep. The buyer sought to rescind the contract.
Decision
The court refused rescission.
Reasoning
The court held that:
- The seller had no special knowledge or experience in sheep farming on that land
- The buyer knew the land had never been used for sheep farming
- The statement was therefore a mere opinion and not a statement of fact
Since the buyer could independently assess the land, the statement could not be treated as misrepresentation.
Principle
A statement of opinion is not misrepresentation unless it is made in circumstances where it implies factual assurance or expert knowledge.
Esso Petroleum v Mardon
Facts
Esso provided projections about the expected output of a petrol station site to a prospective operator. The figures were presented as estimates. The operator relied on these projections and entered into the agreement. The figures later turned out to be grossly inaccurate.
Decision
The court held Esso liable.
Reasoning
The court held that:
- Esso possessed special technical knowledge and experience
- It knew the plaintiff would rely on its projections
- The estimates were made negligently and without reasonable basis
Although framed as opinion, the statement carried the authority of expert knowledge and therefore amounted to misrepresentation.
Principle
Where an expert gives an opinion intending reliance, and the opinion lacks reasonable basis, it becomes actionable misrepresentation.
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