LU2 LACO

• Misrepresentation


  A form of misstatement that does not accord with true facts. It has a narrower technical meaning than a general misstatement.

  
• Misrepresentation


  • Can be express, verbal or implied by conduct
  • Silence may constitute a misrepresentation
  • Can be fraudulent, negligent or innocent
• Fraudulent misrepresentation


  Made knowingly, without belief in its truth, or recklessly without caring whether it is true or false. The test of honest belief is subjective.
• Negligent misrepresentation


  Made honestly but carelessly
• Innocent misrepresentation


  Made without fraud or negligence
• Warranty


  A contractual term where the maker assumes responsibility for the statement
• Representation


  A statement made during pre-contractual negotiations where the maker does not assume responsibility
• The distinction between warranties and representations rests on the intention of the parties - whether they intended the statement to form part of the contract
• Puffs


  General laudatory statements that are not considered misrepresentations if confined to 'indiscriminate puffing and pushing and do not condescend to particulars'
• Dicta et promissa


  Material statements made by the seller to the buyer during negotiations that go beyond mere praise and commendation. If unfounded, the buyer has the aedilition remedies of cancellation or reduction of purchase price.
• Remedies for misrepresentation


  • Set aside the contract and claim restitution
  • Raise misrepresentation as a defence
  • Claim damages for losses caused by the misrepresentation
• Elements for rescission and restitution for misrepresentation


  • Misrepresentation by the other party
  • Inducement
  • Intention to induce
  • Materiality
• Inducement


  There must be a causal connection between the misrepresentation and the conclusion of the contract. No relief if the party knew the representation was false.
• Intention to induce


  The misrepresentation must have been made with the intention of inducing the party to enter the contract, not just an intention to deceive.
• Materiality


  The misrepresentation must be of such a nature that it would have the natural and probable effect of inducing a reasonable person to enter the contract. Reliance on the representation must be reasonable.
• Misrepresentation can be used as a defence, not just to rescind the contract
• Fraudulent misrepresentation


  A deliberate deception that causes financial harm to another party. It is actionable as a delict under the Actio legis Aquiliae.
• For fraudulent misrepresentation, the motive is irrelevant - the representation must have been made without honest belief and with the intention for it to be acted upon.
• Fraudulent misrepresentation


  Deliberate deception that causes another financial harm - actionable under delict (actio legis Aquiliae)
• Fraudulent misrepresentation


  • A representation 2. Which is, to the knowledge of the representor, false 3. Which the representor intended the representee to act upon 4. Which induced the representee to act 5. Representee suffered damages as a result
• Motive is irrelevant for fraudulent misrepresentation - made representation without honest belief and intended for it to be acted upon (intention to cause damage not of consequence)
• Damages arise out of acting on the misrepresentation, not from the intention to cause damage

  
• Implied representation


  Representor unaware of their representation - cannot have intended for it to be acted upon
• Negligent misrepresentation


  There was doubt whether delictual damages may be sought, but after Administrator Natal vs Trust Bank van Afrika, actionability for negligent misrepresentation causing economic loss was recognised
• A contracting party may safeguard themselves against loss by requiring the representor to guarantee the truth of their representations
• Innocent misrepresentation


  If misrepresentation is not a term of the contract and made without intention or negligence, there is no breach and no delictual damages, but the party induced into the contract may be entitled to restitutional damages or partial restitution (action quanti minoris)
• Misrepresentation by silence/non-disclosure/omission


  Failure to disclose a material fact, when there is a legal duty to do so, constitutes a misrepresentation
• Exceptions where there is a duty to disclose


  • Contract of insurance, agency, partnership or engagement (should be made bona fide) 2. Fiduciary relationship between parties 3. Where statute imposes a duty to disclose 4. Where seller knows of a latent defect in the thing being sold 5. Where applicant for credit is an unrehabilitated insolvent 6. Prior conduct or statement renders silence misleading
• The duty to disclose is not derived from an implied term of the contract - it is simply imposed
• Principle underlying duty to disclose


  Parties have to behave in accordance with good faith - there is a duty of disclosure when there is an involuntary reliance of one party on the disclosure of facts necessarily lying within the knowledge of the other, and the former's right to have such information communicated would be recognised by honest men in the circumstances
• A party may remain silent where matters are open to common observation, obtainable through ordinary diligence or accessible to both parties - each could exercise their own judgement
• Duress


  Improper pressure, i.e. intimidation - one who gives consent under duress is not acting through the free exercise of their own will but out of fear inspired by an illegitimate threat
• Requirements to establish duress


  • Actual violence/reasonable fear 2. Fear must be caused by threat of some considerable evil to party or family 3. Threat of an imminent/inevitable evil 4. Threat must be contra bonos mores 5. Moral pressure used must have caused damage
• Types of coercion


  Vis compulsiva: overwhelming physical force (no contract as victim has not acted at all) Vis absoluta: coercion operates in the mind of the victim, forcing them to choose between two evils: contracting and suffering harm
• Reasonableness of the fear


  The threat should be sufficiently grave to affect the mind of a reasonable person, taking into account the age, sex and other personal attributes of the victim
• Object of the threat


  The threat must be directed at the life, body or property of the victim or their family
• The main question is whether the party's consent was obtained through improper means
• Duress of goods


  Protest at the time of payment or entry into the contract as proof of the involuntary nature of the transaction
• Imminence of the harm


  Relief should still be granted even if the threat was neither imminent nor inevitable
• Unlawfulness of the threat


  The threat must be contra bonos mores - if you enter into a contract because of a lawful threat, there is no complaint, as duress is getting the victim's consent by improper means