Misrepresentation passed on via a third party
Once an untrue statement has been made from one party to another, it is
usually considered ‘spent’, so it is no longer a misrepresentation if the
second party passes it on to a third. However, if the first party knows that
the wrong information is likely to be passed on, then an actionable
misrepresentation may arise. This was so in Pilmore v Hood (1838) when
the seller of a pub wrongly stated the takings, knowing that the information
was likely to be passed on to another person who bought the business.
Inducement
In the definition of misrepresentation, we saw that the untrue statement
must have induced the representee to contract. If the other party had not
read or heard the representation, or had not placed any reliance on it at all,
then they have no claim against the representor.
So, if a person with reasonable skill makes enquiries of their own (for
example, if a mechanic examines a car thoroughly), it is likely that they will
be held to have relied on those enquiries rather than the ones made by the
seller. If the representee tests for accuracy, but fails to discover the truth,
the case of Redgrave v Hurd (1881) suggests that they may still be regarded
as having relied on the representor’s untrue statement.
The case of Barton v County NatWest (2002) found that there is a
rebuttable presumption that a claimant relied on an inducing statement if a
reasonable person would have done so.
Remedies
Where a misrepresentation is found to exist, the innocent party will need a
remedy. Two main remedies exist: rescission and damages. Rescission is
where the parties are restored to their original position by handing back
whatever they have acquired under the contract. So if a contract had been
174 Contract law
Attwood v Small (1838)
The buyers of a mine claimed misrepresentation when the amount of
minerals in it were found to be less than that stated by the seller.
However, it was held that they had relied on the results of their own
private survey rather than the statements of the seller (of course, the
buyer may have had a claim in negligence against the surveyor, had the
case arisen more recently).