Misrepresentation in Irish Contract Law

Misrepresentation is a vitiating factor: a defect in the formation of a contract that undermines genuine consent. It is examined alongside mistake, because the two overlap on the facts while their consequences differ completely. An operative mistake makes a contract void — a nullity from the start, so no title passes to anyone. A misrepresentation makes it voidable, so a good-faith third party who acquires the property before rescission is protected.

The four elements were set out by McCracken J in Colthurst v La Touche Colthurst Binding (IE): a representation of fact, made by or on behalf of one party to the other, which is untrue and which induced the representee to contract. It must also be material.

A statement of fact — and what does not count

The statement must be one of fact, which excludes several familiar categories.

• Opinion. An honest opinion that turns out wrong is not actionable — an estimate of how many sheep land that had never carried sheep would hold was opinion only (Bisset v Wilkinson Persuasive (Eng)). But where the speaker has special knowledge the other side lacks, or does not honestly hold the view, the "opinion" is treated as fact.
• Puffery. Vague sales talk — land fertile and improvable — commits the seller to nothing: no reasonable buyer treats it as a factual assertion.
• Intention. A promise about the future is not fact, but a statement of present intention is, because the state of a man's mind is as much a fact as the state of his digestion — so a borrower who says the money is for expansion while intending to clear old debts misrepresents (Edgington v Fitzmaurice (1885) 29 Ch D 459 Eng).
• Law. A misstatement of the general law is not actionable, both parties being taken to have equal access to it, but a statement about private rights — what a particular lease or title confers — is fact.

Silence, half-truths and the duty to disclose

The starting point is that silence is not misrepresentation. Caveat emptor applies, and a party who says nothing owes no general duty to volunteer what it knows. Four exceptions matter.

The first is the half-truth: an answer that is literally true but selective, so that it creates a false overall impression, is a representation and it is untrue. The second is a change of circumstances — a representation true when made but falsified before signing must be corrected, as where a medical practice's income collapsed between the statement about its earnings and the sale (With v O'Flanagan Eng). The third is contracts uberrimae fidei, classically insurance, where the insured must disclose every material fact a prudent insurer would consider relevant even if never asked — the Irish authority being Chariot Inns v Assicurazioni Binding (IE), where Kenny J set materiality objectively, by reference to the reasonable insurer rather than to what this insured thought mattered. The fourth is conduct: a representation needs no words at all.

Note the consumer reform. The Consumer Insurance Contracts Act 2019 replaces the consumer's pre-contractual duty of utmost good faith with something narrower: a duty to answer the insurer's specific questions honestly and with reasonable care, volunteering nothing further. The older disclosure duty survives for non-consumers, so the regime turns on who the insured is.

Inducement and reliance

The representee must show the statement actually induced the contract. The courts help here: where a material representation is made in order to induce, reliance is inferred unless the representor proves the contrary (Egan v Heatley IE). Nor need it be the sole cause — it is enough that it contributed to the decision (Edgington v Fitzmaurice). And it takes actual knowledge of the truth, not constructive notice, to defeat the claim.

Reliance fails where the representation never reached the representee, where they knew the truth, where they took a deliberate risk as to its truth, or where they relied instead on their own investigation — a buyer who commissions due diligence and acts on that cannot later say it was induced by the seller's assurance.

The three categories

Classification does not change whether there was a misrepresentation; it changes the remedy.

• Fraudulent — made knowingly, without belief in its truth, or recklessly, careless whether it be true or false: the Derry v Peek (1889) 14 App Cas 337 Eng definition, which turns on honesty rather than carelessness, so an honest but foolish belief is not fraud. The onus is heavy and the proof must be cogent. Remedies: rescission plus damages in the tort of deceit.
• Negligent — made without reasonable grounds for belief. At common law this requires a special relationship and a duty of care of the Hedley Byrne v Heller Eng kind, long since adopted in Ireland. Remedies: rescission plus damages for negligent misstatement, or under section 45(1) of the 1980 Act.
• Innocent — made honestly and on reasonable grounds. Rescission is the remedy; damages are not generally available at common law, though the court has a discretion under section 45(2).

The leading Irish case on negligent misrepresentation is Walsh v Jones Lang LaSalle Binding (IE), where an estate agent's brochure disclaimer negated any assumption of responsibility, so no duty of care arose to a buyer who relied on a mis-stated floor area — a three-to-two Supreme Court decision, which tells you how finely that line is drawn. Section 45(1) matters for the opposite reason: it reverses the burden of proof, so the representee proves only reliance and loss and the representor must prove it had reasonable grounds to believe, and did believe, the statement true.

Rescission and its bars

Because the contract is voidable, the representee elects: rescind, restoring both parties to their pre-contractual positions, or affirm and carry on. The right is not indefinite. It is lost by affirmation, where the representee, knowing the truth and the right to rescind, treats the contract as continuing. It is lost by lapse of time — for innocent misrepresentation time runs from the contract itself, so a purchaser who discovered five years on that his Constable was not one was too late (Leaf v International Galleries Eng), while for fraud it runs only from discovery. It is lost where restitutio in integrum is impossible, though substantial rather than precise restoration suffices (Northern Bank Finance v Charlton Binding (IE)). And it is lost once a bona fide purchaser for value without notice has acquired the property.

Two statutory points finish the picture. Section 44 of the 1980 Act removes, for contracts within its scope, the old bars that the contract had already been performed or that the misrepresentation had become a term of it. And under section 45(2) the court may declare a non-fraudulent contract subsisting and award damages in lieu of rescission. An indemnity, which is not damages, may also accompany rescission to cover obligations the contract required the representee to take on.

Related Contract notes: undue influence · exclusion clauses and unfair terms · all free Contract notes.