Mistake vs. Misrepresentation

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  • Topic: Misrepresentation, Misrepresentation Act 1967, Tort
  • Pages : 3 (746 words )
  • Download(s) : 8682
  • Published : January 26, 2012
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In brief:
Mistake vs Misrepresentation
• A mistake is inadvertent and only an error on the part of the person committing it while misrepresentation is often wilful or intentional, done with the intention of gaining wrongfully.

The main difference between Mistake and Misrepresentation is that in the case of Mistake one or both parties to a contract or what was intended to be a contract unintentionally or unknowingly made statements not intended to mislead the other. Therefore fraud cannot be implied from these statements or circumstances. At Common law, a mistake can affect the validity of a contract “operative mistake”, making it null and void. In the case of misrepresentation, false statements of facts are required to be made which knowingly or unknowingly could amount to fraud and remedy or rescission may apply. In the modern law, misrepresentation is classed as fraudulent, negligent or wholly innocent. Fraudulent misrepresentation

“Fraudulent” in this sense was defined by Lord Herschell in Derry v Peek (1889) 14 App Cas 337 as a false statement that is “made (i) knowingly, or (ii) without belief in its truth, or (iii) recklessly, careless as to whether it be true of false.” The essence of fraud is the absence of honest belief; in Derry v Peek , a share prospectus falsely stated that the company had the right to use mechanical power to draw trams, without explaining that governmental consent was required for this. In fact, the directors honestly believed that obtaining consent was a pure formality, although it was ultimately refused. The House of Lords held that there had been no fraudulent misrepresentation. Lord Herschell however did point out that though unreasonableness of the grounds of belief is not deceitful, it is evidence from which deceit may be inferred. There are many cases, "where the fact that an alleged belief was destitute of all reasonable foundation would suffice of itself to convince the court that it was not really...
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