Misrepresentation occurs when one party to a contract (Party A) makes an untrue statement of fact to the other party (Party B) which induces Party B to enter into a contract and potentially suffer loss. Misrepresentation can be fraudulent or non-fraudulent.
In fraudulent misrepresentation, a statement is made without belief in its truth or carelessness of whether it is true or not. Non-fraudulent misrepresentation is divided into innocent or negligent. The remedies for misrepresentation are recession and/or damages depending on the type of misrepresentation that has occurred. However, a court has the discretion to award damages instead of rescission under the Misrepresentation Act 1967 (section 2(2)). In conveyancing, the prospective buyer has the responsibility to carry out enquiries. This involves discovering information that the buyer relies on the seller to disclose such as physical defects in the property or neighbour disputes. The replies are considered representations made by the seller to the buyer and the buyer is entitled to rely on them. If a buyer completes a sale and discovers an undisclosed problem with the property or that the seller made a false statement (whether deliberately or not), the seller may be liable for misrepresentation.
The misrepresentation does not need to be the sole point that the buyer relied upon to enter into the contract, as liability for misrepresentation can arise even when the false statement of fact forms only part of the information relied on by the buyer. A seller can raise various defences against a claim of misrepresentation. These include that the seller did not intend the buyer to rely on the representation or that the buyer would have entered the contract anyway, notwithstanding the misrepresentation. Exclusion clauses may also apply if they are properly incorporated into the contract of sale, but they will not exclude liability for fraudulent or negligent misrepresentation.
In the case of William Sindall plc v Cambridgeshire County Council [1993] EWCA Civ 14, the court considered the use of the phrase ‘Not so far as the vendor is aware’ as a defence against an innocent misrepresentation claim. It was held that: “…a statement that a vendor is not aware of a defect title carries with it an implied representation that he has taken reasonable steps to ascertain whether any exists…”.
In this case, the seller was found not liable for misrepresentation because they had undertaken reasonable investigations and had not discovered the sewer under the property which led to a depreciation of the value of the land. Implied representation may be displaced by an express provision in the contract that the seller has not made any enquiries. This approach succeeded in the case of Morgan v Pooley [2010] EWHC 2447 (QB).
For a buyer, it is therefore difficult to rely solely on misrepresentation. In relevant situations, a claim could, additionally, or in the alternative, be pursued via a breach of standard conditions of sale (SCS). These are included in the contract of sale. If a plan or statement is misleading due to an error or omission by the seller to the extent that there is a material difference between the description of the property compared to the property represented by the seller, then there may be a breach of contract, in which case the buyer is entitled to damages. The buyer may be able to rescind the contract if it either results from fraud or negligence by the seller or where the buyer would have to accept (to his detriment) a property ‘differing substantially in quantity, quality or tenure from which the error or omission led him to expect’ (Standard Conditions of Sale 2018 (7.1.1(b)(ii)).
This differs from misrepresentation as it removes the element of reliance by the buyer on the representation. That said, the SCS also emphasise the principle of caveat emptor (let the buyer beware) in which it is the sole responsibility of the buyer to investigate the condition of the property before completing the purchase to ensure that he is getting what he believes he has bargained for.
