Chapter 14 Multiple-choice questions

. The law of misrepresentation relates to the law concerning the effect on a contract (and hence the parties' positions) where that contract was entered into on the basis of a false statement made during the course of contractual negotiations.

True

False

. Where a misstatement is made by A to B in the course of negotiations leading to a contract between A and B, it may be possible for B to bring a damages claim for breach of contract.

True

False

. A is interested in buying B's house. During the pre-contractual negotiations, B refuses to answer any of A's questions. Subsequently, B is informed that the house is infested with death-watch beetle but fails to tell A of that fact. A thereupon buys the house but is told that it will need to be demolished within six months. Which one of the following statements most accurately summarizes the position between the parties?

A is entitled to sue B for misrepresentation as a result of B's refusal to answer any questions.

A is entitled to sue B for misrepresentation because B's active concealment of the defect constitutes an untrue statement of fact.

A is entitled to sue B for misrepresentation because B has greater knowledge than A of the condition of his property.

A is entitled to sue B for misrepresentation because B failed to pass on the information that he had subsequently acquired.

. A false representation is a representation that is untrue according to the construction put on it by the representee.

True

False

. When making contracts uberrimae fidei (of utmost good faith), one or both parties may be under a duty to disclose all material facts.

True

False

. A agrees to buy B's house. During the pre-contractual negotiations, B refuses to answer any of A's questions. In fact, local authority plans to build a motorway near B's house have recently been publicized. B realizes that the value of her house will plummet when the plans to build a motorway are given more widespread publicity but she also knows that, for the moment, A is unaware of the intended motorway construction. A buys the house and immediately discovers the motorway plan. Which one of the following statements most accurately summarizes the position between the parties?

A is not entitled to sue B for misrepresentation because B had no duty to disclose the motorway building plan.

A is entitled to sue B for misrepresentation because B has a duty to disclose the motorway building plan due to a change of circumstances.

A is entitled to sue B for misrepresentation because B has told a half-truth.

A is entitled to sue B for misrepresentation because A and B are in a fiduciary or confidential relationship.

. Which one of the following misstatements is not likely to be a misstatement of fact?

A misstatement by a vendor to a purchaser as to the conditions of his house put up for sale.

A misstatement by a landlord to a tenant that relevant legislation prevents the tenant from terminating the tenancy contract on less than three months' notice.

A misstatement by a private car owner to a potential buyer as to a highly technical specification of the car.

A misstatement made negligently by a financial adviser to a client in relation to future movements of the financial market.

. A statement of intention always amounts to a misrepresentation if the representor subsequently alters his intention and fails to inform the representee of the change of intention.

True

False

. A is hoping to sell his 15ft yacht to B. During the pre-contractual negotiations A says: 'I think you should get the boat surveyed. It's always been reliable but I recently had to pay for the mast to be repaired.' Unknown to B, A has used paint and other means to conceal other repaired parts of the yacht. B purchases the yacht without further inspection but then finds out that recent repairs to the yacht included the rudder, keel and hull. Which one of the following statements most accurately summarizes the position between the parties?

A's statement is not an actionable misrepresentation because the caveat emptor principle applies on the facts.

A's statement is an actionable misrepresentation because it amounts to an active concealment of the defects of the yacht.

A's statement is an actionable misrepresentation because his statement constitutes a half-truth.

A's statement is not an actionable misrepresentation because B's failure to have the yacht properly surveyed demonstrates that he was not induced to purchase the yacht by that statement.

. A misrepresentation that is not intended to be acted upon is not actionable, even if it has actually been relied upon by the representee.

True

False

. Which of the following principles were recognised and applied by the Court of Appeal in Edgington v Fitzmaurice (1885) 24 ChD 459? [Please select all that apply.]

In order to be actionable, a misrepresentation must be the only factor to have contributed to the decision to enter into the contract.

A false statement of a present intention is a misstatement of fact.

A fraudulent misrepresentation induces a contract, even if it is not the only factor to have contributed to the decision to enter into the contract.

A misstatement of intention does not amount to an actionable misrepresentation.

. Where a misrepresentation is incorporated as a term of the contract, the misrepresentee may set the contract aside for misrepresentation and then claim damages for breach of contract.

True

False

. Which of the following statements correctly describe the advantages for a party in bringing a claim alleging negligent misrepresentation under s. 2(1) of the Misrepresentation Act 1967 rather than at common law? [Please select all that apply.]

Under s. 2(1), the misrepresentee does not have to prove the existence of a special relationship between him and the misrepresentor.

Under s. 2(1), the misrepresentor has the burden to disprove negligence and this burden is not to be discharged lightly.

Under s. 2(1), the misrepresentee is entitled to claim expectation damages.

Under s. 2(1), the misrepresentee is entitled to all of the losses directly caused by the misrepresentation, even if the losses are not reasonably foreseeable at the time of the misrepresentation.

. Section 2(1) of the Misrepresentation Act 1967 would have been applicable to the facts of Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 had the Act been in force at that time.

True

False

. In which one of the following situations will the misrepresentee's right of rescission remain?

A bought goods from B last week and used them in his manufacturing process. A has now discovered that B had fraudulently misrepresented the quality of the goods.

A bought a painting from B two years ago. It hangs in his private gallery. A recently discovered that B had fraudulently misrepresented the provenance of the painting at the time of the sale.

A bought goods from B last week and sold them on to X. A has now discovered that B had fraudulently misrepresented the quality of the goods.

A bought a painting from B two years ago. It hangs in his private gallery. Last year, A discovered that B had fraudulently misrepresented the provenance of the painting at the time of sale, but he was so happy with the painting that he did not complain. He has now changed his mind and wants to claim back the contract price from B.

. Which one of the following statements in relation to the three types of misrepresentation is true?

A misrepresentation is fraudulent if the misrepresentor, when making the misrepresentation, has no reasonable ground to believe that the statement is true.

To claim damages on the ground that a misrepresentation is negligent, the misrepresentee must prove the existence of a special relationship between the misrepresentor and the misrepresentee.

An innocent misrepresentation does not give the misrepresentee a right of rescission; it is a matter of the court's discretion whether the misrepresentee has such a right.

A change of circumstances misrepresentation will entitle the misrepresentee to claim damages under the Misrepresentation Act 1967.

. Damages for fraudulent misrepresentation will not be affected by any contributory negligence on the part of the misrepresentee.

True

False

. A is considering buying B's bakery business as an investment. By a fraudulent misrepresentation, B induces A to buy the bakery for £180,000 although its actual value is only £120,000. When A discovers the fraud two weeks later, the value of the bakery has reduced to £80,000 due to serious damage caused by the collapse of a supporting wall at the bakery premises. At this point, a buyer offers £80,000 for the bakery. A does not sell until three months later, when A only gets £75,000 because of an economic downturn. A rescinds the contract with B for fraudulent misrepresentation and claims damages. Which one of the following statements most accurately calculates the damages to which A is entitled?

A is entitled to £60,000 in damages because this represents the difference in value between the amount paid and the actual value at the date of the contract.

A is entitled to £100,000 in damages because this is the only loss caused by B's misrepresentation.

A is entitled to £105,000 damages because this would put A into the position before the misrepresentation was made.

A is entitled to £180,000 damages because, upon rescission of the contract, the parties would be restored to their positions before the contract was made.

. On the basis that the law will not accept the exclusion of liability for a person's own fraud, a clause that purports to exclude liability for all types of misrepresentation (fraudulent, negligent, and innocent) will automatically be unreasonable under s. 3 of the Misrepresentation Act 1967 because it could be an attempt to exclude liability for fraud.

True

False

. Which one of the following statements relating to a claim for damages brought under s. 2(1) of the Misrepresentation Act 1967 is true?

The principle of mitigation does not apply to the misrepresentee who brings such a claim.

The misrepresentee's contributory negligence will not be taken into account in assessing the amount of damages.

The misrepresentee is entitled only to recover losses that are reasonably foreseeable by the misrepresentor at the time when the misrepresentation is made.

The aim of damages is to put the misrepresentee into the position it would have been in had it not entered into the contract.

. Section 2(2) of the Misrepresentation Act 1967 gives the representee of an innocent misrepresentation a right to claim damages in lieu of rescission.

True

False

. Where the parties have inserted a 'no reliance' clause into their contract, the effect of such a clause is to exclude the application of s. 3 of the Misrepresentation Act 1967.

True

False

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