Misrepresentation Act 1967

Misrepresentation Act 1967 is a UK law that governs the rights and remedies available to parties who have been induced to enter a contract by misrepresentation.
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Updated: Jun 25, 2024

3 key takeaways

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  • The Misrepresentation Act 1967 provides remedies for parties misled into contracts by false statements.
  • It distinguishes between innocent, negligent, and fraudulent misrepresentation, each with different legal consequences.
  • The Act allows for rescission of the contract and/or damages, depending on the type of misrepresentation and the circumstances.

What is the Misrepresentation Act 1967?

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The Misrepresentation Act 1967 is a key piece of legislation in the United Kingdom that addresses issues arising when a party enters into a contract based on a false statement made by another party. The Act outlines the remedies available to the misled party and clarifies the distinctions between different types of misrepresentation: innocent, negligent, and fraudulent.

The Act was introduced to simplify and codify the law of misrepresentation, providing clear guidance on the rights of parties and the remedies available when misrepresentation occurs.

Types of misrepresentation

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Innocent misrepresentation

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Innocent misrepresentation occurs when a false statement is made without fault, meaning the person making the statement genuinely believed it to be true and had reasonable grounds for that belief. Under the Misrepresentation Act 1967, a contract induced by innocent misrepresentation can be rescinded, but damages are typically not awarded unless the court decides otherwise.

Negligent misrepresentation

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Negligent misrepresentation occurs when a false statement is made carelessly or without reasonable grounds for believing its truth. The Misrepresentation Act 1967 allows the misled party to claim rescission of the contract and/or damages for negligent misrepresentation. The Act provides that the burden of proof is on the person who made the statement to show they had reasonable grounds for believing it was true.

Fraudulent misrepresentation

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Fraudulent misrepresentation is when a false statement is made knowingly, without belief in its truth, or recklessly, without caring whether it is true or false. In cases of fraudulent misrepresentation, the misled party can seek rescission of the contract and/or damages. The damages available for fraudulent misrepresentation can be substantial, as they are intended to compensate for all losses directly resulting from the misrepresentation.

Remedies under the Misrepresentation Act 1967

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Rescission

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Rescission is the primary remedy for misrepresentation, allowing the misled party to void the contract and be restored to the position they were in before entering into the contract. Rescission is available for all types of misrepresentation, but certain factors can bar rescission, such as if the contract has been affirmed, if a significant period has passed, or if third-party rights are affected.

Damages

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The Misrepresentation Act 1967 allows for the awarding of damages in addition to or instead of rescission, depending on the type of misrepresentation:

  • Innocent misrepresentation: Damages are not automatic and are at the discretion of the court, which may award damages in lieu of rescission if it deems it just.
  • Negligent misrepresentation: Damages can be claimed under the Act, and the misled party does not need to prove fraud, only negligence.
  • Fraudulent misrepresentation: Damages are more substantial and aim to fully compensate the misled party for all losses incurred due to the misrepresentation.

Burden of proof

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The Act shifts the burden of proof in cases of negligent misrepresentation. Under Section 2(1) of the Misrepresentation Act 1967, the person making the false statement must demonstrate that they had reasonable grounds to believe the statement was true. This shift is significant as it simplifies the process for the misled party to claim damages.

Case law and interpretation

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The Misrepresentation Act 1967 has been interpreted and applied in numerous legal cases, shaping the understanding and application of the law. Key cases have clarified aspects such as the calculation of damages, the circumstances in which rescission can be barred, and the distinction between different types of misrepresentation.

Related Topics:

  • Contract law
  • Fraudulent misrepresentation
  • Negligent misrepresentation
  • Remedies in contract law
  • Consumer protection laws

Exploring these topics will provide a comprehensive understanding of the legal framework surrounding misrepresentation, the rights of parties involved in contracts, and the remedies available to address wrongful inducements into contractual agreements.



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Arti
AI Financial Assistant
Arti is a specialized AI Financial Assistant at Invezz, created to support the editorial team. He leverages both AI and the Invezz.com knowledge base, understands over 100,000... read more.