← The hardest concepts in United Kingdom law
In one breath
A misrepresentation is a false statement of fact that induces a contract, and it can let the misled party rescind or claim damages. A mistake is an error in what the parties believed, and only a narrow band of mistakes stops a contract from binding at all.
The picture
The label on the jar
A shopper buys a jar from a shelf. If the assistant says, “This is honey,” and it turns out to be syrup, the shopper has been misled by something said and relied on, and can send it back. If shopper and seller both believed the jar was full when it was in fact an empty case, or each was thinking of a different jar, the problem is not what was said but what each believed. And if the shopper simply guessed the jar was a bargain, the sale stands. The law is generous when someone is misled and stingy when someone is merely wrong.
A misrepresentation is a false statement of existing fact, made to the other party, that induced the contract. The misled party can usually rescind, and may claim damages under the Misrepresentation Act 1967, unless the maker shows reasonable grounds to believe, and actual belief, that it was true. Mistake is narrower. Common mistake, the same fundamental error on both sides, makes a contract void only if it makes performance impossible or essentially different from what was agreed. Mutual mistake and unilateral mistake concern parties at cross-purposes or one who knows the other is mistaken.
Where the picture stops working
Contracts also allocate risk: a buyer who takes the risk of the jar’s contents cannot call it a mistake afterwards. The courts once used equity to give more generous relief for common mistake, but the leading modern decision held that the common law test governs. And rescission can be lost even for a real misrepresentation. Scots law deals with error and misrepresentation under its own rules, with similar results in many cases.
How it really works
- 1Ask whether a statement was made: a false statement of fact, before or at the time of the contract, by or for the other party. Opinion and sales talk do not count, and silence is not normally misrepresentation.
- 2Ask whether it induced the claimant. It need not be the only reason, and the claimant is not barred just because they could have checked (Redgrave v Hurd).
- 3Classify the wrong as fraudulent (Derry v Peek), negligent (Misrepresentation Act 1967, section 2(1)) or innocent. The class affects the remedy, which is rescission, damages or both.
- 4If there is no misrepresentation, look at mistake: common, mutual or unilateral.
- 5For common mistake, ask whether the error makes the contract impossible to perform or essentially different. Error about quality or value rarely suffices (Bell v Lever Brothers; Great Peace Shipping).
Why people get it wrong
- Treating a mistake as an escape from a bad bargain. Most mistakes about value or quality leave the contract binding.
- Merging the two doctrines. Misrepresentation concerns what one side said to the other; mistake concerns a mistaken belief, whether or not anyone said anything.
- Calling any exaggeration a misrepresentation. Sales talk, opinion and predictions are generally not statements of fact.
- Forgetting that rescission can be lost: by affirming the contract after learning the truth, by delay, or because an innocent third party has gained rights.
A worked example
The facts are invented
Elin buys a second-hand van from Ward, a dealer. Ward says, “It has done forty thousand miles,” without checking. It has done ninety thousand. Elin relied on the figure when deciding to buy. This is a misrepresentation: Elin can usually rescind and recover the price, and Ward is liable in damages unless he can show reasonable grounds for believing the figure was true.
Contrast two other sales. Fenn buys a racehorse from Gale, and unknown to both of them the horse died the night before. This is a common mistake about the existence of the very thing sold, and the contract is void. Then Hari buys a painting from Joel, both believing it to be by a famous artist because of an old label; Joel said nothing about the artist. This is a mistake about quality, and the sale ordinarily stands.
Try it
Sana buys a painting from Joel, both believing it to be by a famous artist because of an old label. It is by a minor artist, and Joel made no statement about the artist. Is the contract void for common mistake?
Landmark authorities
Read the sources themselves; this list is a starting point.
- Redgrave v Hurd, (1881) 20 Ch D 1
- Derry v Peek, (1889) 14 App Cas 337
- Bell v Lever Brothers Ltd, [1932] AC 161
- Misrepresentation Act, 1967
- Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd, [2002] EWCA Civ 1407, [2003] QB 679
Where to go next
Courses
Case briefs
More hard concepts in United Kingdom law
- Consideration and promissory estoppel (Contract law)
- Privity and third-party rights (Contract law)
- Penalty clauses and liquidated damages (Contract law)
This page is an educational overview. It is not legal advice and not a substitute for the sources: the statute, the rule, the case itself. The United Kingdom has three legal systems: England and Wales, Scotland, and Northern Ireland. These pages mostly describe the law of England and Wales and say where Scots law differs when it clearly does; Northern Ireland law is often similar to English law but is not covered separately. Parliament is sovereign, but the devolved legislatures also make law within their powers. Each page states the usual formulation of the rule and names landmark decisions; check the primary sources before relying on any rule.