Contractual Obligations – Prof. Helge Dedek Introduction 1

Misrepresentation (CML)

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  If a party has been induced into a contract through misrepresentation he may rescind the contract. The following constitutes misrepresentation:
  
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    “Material statement of fact that is false”
    
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    Statement of present or past fact that is false
    
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  To be distinguished from:
  
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    Sales talk (exaggeration, puffery – perspective of the objective observer – has the line been crossed?)
    
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    Opinion (question of expertise – has it been made clear that it is only a subjective opinion and is not to be relied on, or is legitimate reliance reasonably foreseeable from the perspective of the objective observer?)
    
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    Intention (prediction about the future, promise or statement about a present intention)
    
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      Very difficult to draw the line in abstract terms here – to be very carefully interpreted and weighed in the light of the surrounding circumstances
      
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  Only in relation to present or past fact – any statement in terms of future fact (to be distinguished from intention, which may be a promise, therefore binding) is merely a projection or “prophecy” (HD)
  
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  Law v. Fact – is it a legal opinion which is being stated? If yes, it could result in legitimate reliance.
  
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  Materiality
  
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    Misrepresentation must relate to a matter that by a RP would be considered relevant for the decision to enter the agreement in question
    
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    (Same consideration in CVL – it must be regarding a material term of the contract)
    
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  Inducement
  
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    Misrepresentation must have constituted an inducement upon which the representee relied
    
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    Not necessarily exclusive or predominant inducement
    
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    Actual reliance
    
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    No duty to engage in “due diligence”
    
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    If, but for the inducement, the contract would not have been entered into.
    

1. 
   Statement: was false (did not retire, but had been in jail)
   
2. 
   Materiality: passes reasonable person relevance test, he misrepresented to teach business ethics!
   
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     His omissions and deceit were regarding direct qualifications for the job – if he had been honest about his past, he would not have been hired.
     
3. 
   Inducement: relied on misrepresentation for contract, was discouraged to pursue references
   
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     Court may say that “pure silence” can be misleading – but in that case, it is necessary to establish a positive duty to disclose – we will get into this later. Goes back to the idea of due diligence