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Contract: Misrepresentation and Economic Duress

Negligent misrepresentation

  • 3 things to know
  • Components 2 and 3

Overview

Section 2(1) of the Misrepresentation Act 1967 and the fiction of fraud, the reversed burden of proof, the criticism of Royscot Trust v Rogerson, and the Hedley Byrne route that runs alongside it.

What you need to know

Answer each one before you reveal it.

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Key term

What is negligent misrepresentation?

Key term

What does section 2(1) of the Misrepresentation Act 1967 provide?

Numbers

Why is section 2(1) called the fiction of fraud?

Questions from this subtopic

Each one with the model answer underneath.

  1. 1

    What is negligent misrepresentation?

    Model answer

    Negligent misrepresentation is a false statement made carelessly and without reasonable grounds for belief. The maker is honest but has failed to take proper care.

  2. 2

    What does section 2(1) of the Misrepresentation Act 1967 provide?

    Model answer

    Section 2(1) allows damages where a false statement induces a contract and causes loss. The maker escapes liability only by proving reasonable grounds for believing the statement true.

  3. 3

    Why is section 2(1) called the fiction of fraud?

    Model answer

    Section 2(1) makes the maker liable as if the statement had been made fraudulently. Royscot Trust v Rogerson [1991] therefore applied the deceit measure of damages.

  4. 4

    Why is Royscot Trust v Rogerson [1991] criticised?

    Model answer

    Royscot Trust v Rogerson [1991] gives a careless statement the same wide damages as a dishonest one. Critics argue that Parliament cannot have intended that result.

  5. 5

    Who bears the burden of proof under section 2(1)?

    Model answer

    The maker of the statement must prove reasonable grounds for the belief held. The reversed burden makes section 2(1) attractive to claimants.

  6. 6

    Which case shows a defendant failing to discharge the burden under section 2(1)?

    Model answer

    Howard Marine and Dredging Co v A Ogden & Sons (Excavations) Ltd [1978] concerned a false statement about two barges. The owners misstated the carrying capacity and had relied on a register entry rather than their own documents.

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