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How a representation becomes a misrepresentation 117

Contracts of insurance

Contracts of insurance are contracts uberrimae fidei(of the utmost good faith). In such con-
tracts, everything which could affect the price of the premium is a material fact. A person
taking out insurance must reveal all material facts, whether asked about the matter or not.

Lambert vCo-op Insurance Society Ltd (1975) (Court of Appeal)

The claimant insured her own and her husband’s jewellery. She did not mention that her

husband had been convicted of a small theft some years earlier. When the claimant

renewed the policy she did not reveal that her husband had recently been sent to prison for

15 months for theft. The insurance company did not ask about convictions so the claimant

felt no need to mention them. Over £300-worth of the insured jewellery was later stolen,

and the claimant claimed on her insurance.

HeldThe insurance company did not need to pay on the policy. The convictions were

a material fact and the claimant should have revealed them. Not to do so amounted to a

misrepresentation.

Nottingham Patent Brick and Tile Co vButler (1886) (Court of Appeal)

The defendant’s solicitor, who was selling land on behalf of the defendant, was asked

whether there were any restrictive covenants attached to the land. (The buyer would gen-

erally not want restrictive covenants. If there were any, they would be included in documents

which the solicitor should have read.) The solicitor replied that he was not aware of any

restrictive covenants. This was true, but the reason why the solicitor was not aware of

any was that he had not read the documents which he should have read. The claimant

agreed to buy the land but pulled out of the contract when he discovered that there were

restrictive covenants.

HeldThe solicitor’s statement, although literally true, was a misrepresentation. Therefore

the claimant was entitled to withdraw from the contract.

Where there is a fiduciary relationship between the parties

A fiduciary relationship is a relationship of great trust. When the parties in such a relationship
make a contract with each other, everything must be revealed. If this is not done, the silence
will amount to a misrepresentation. Promoters and directors of companies owe fiduciary
duties to their companies, and partners in a firm owe fiduciary duties to each other.

Silence makes a statement misleading

Even a statement which is literally true can amount to a misrepresentation if the statement
conveys a misleading impression.

Remedies for misrepresentation

There are three types of actionable misrepresentation. Each type gives rise to different
remedies.