- •The contents of the contract
- •4.1 Introduction
- •4.2 Distinction between Representations and Terms
- •4.2.1 Was the claimant relying on the skill and knowledge of the defendant?
- •4.2.3 Was there a significant lapse of time between the statement and the contract?
- •4.3 Remedies for Pre-Contractual Statements
- •4.3.1 Misrepresentation
- •4.3.2 Collateral contract
- •4.3.4 Negligent misstatement
- •4.3.5 Conclusion on pre-contractual statements
- •4.4 Express Terms
- •4.4.1 Incorporation
- •4.4.2 Construction
- •4.4.3 Methods of interpretation of express terms
- •4.4.3.1 «Purposive» or «commercial» interpretation
- •4.4.3.2 Interpretation under the Principles of European Contract Law
- •4.4.5 Conditions, warranties and innominate terms
- •4.5 Implied Terms
- •4.5.1 Terms implied by the courts
- •4.5.2 Terms implied by custom
- •4.5.3 Terms implied in fact
- •4.5.4 The Moorcock test
- •4.5.5 The «officious bystander» test
- •4.5.6 Terms implied by law
- •4.5.7 Liverpool City Council V Irwin
- •4.5.8 Terms implied by statute
- •4.5.9 Implied terms under the Sale of Goods Act
- •4.5.9.1 Title
- •4.5.9.2 Description
- •4.5.9.3 Satisfactory quality
- •4.5.9.4 Fitness for a particular purpose
- •4.5.9.5 Relationship between s 14(2) and s 14(3)
- •4.5.9.6 Sale by sample
- •4.5.10 Implied terms under the Principles of European Contract Law
- •4.6 Statutory Controls
4.3.4 Negligent misstatement
In 1963, the House of Lords confirmed that the tortious action for negligence could provide a remedy for negligent misstatements which have resulted in purely economic loss. The development of the law in this area over the past 30 years has been complicated, as the courts have tried to decide exactly when a duty of care as regards such statements can be said to arise. The recent trend, as shown by cases such as Caparo v Dickman has been to limit strictly the number of «special relationships» which can give rise to such a duty, though this has been softened to some extent by the subsequent decisions in Henderson v Merrett Syndicates Ltd and White v Jones. There is little doubt, however, that a duty of this kind may arise between parties who subsequently enter into a contract. The possibility was recognised in Esso v Mardon, for example. In practice, however, the existence of the remedies under s 2 (1) of the Misrepresentation Act 1967 means that it is not very likely to be needed in this situation. The action under the 1967 Act has the advantage that the burden of proof as regards negligence is on the defendant (who effectively has to disprove it), and that more extensive damages are available. The only situation where it might be necessary for a party to a contract to look to the common law negligence action is where the statement is not a representation in the strict sense, and it is also impossible to construct a collateral contract.
4.3.5 Conclusion on pre-contractual statements
As we have seen, there are a variety of actions which may be available in relation to pre-contractual statements. There is nothing to stop a claimant relying on more than one, as was pointed out by Lord Denning in Esso v Mardon. In an unusually frank (for a judge) recognition of the way in which lawyers manipulate legal concepts to achieve their desired result, he explained how, at a time when no damages were available for a non-fraudulent misrepresentation, other alternatives would be sought:
In order to escape from that rule, the pleader used to allege – I often did it myself – that the misrepresentation was fraudulent, or alternatively a collateral warranty. At the trial we nearly always succeeded on collateral warranty. We had to reckon, of course, with the dictum of Lord Moulton that «such collateral contracts must from their nature be very rare». But more often than not the court elevated the innocent misrepresentation into a collateral warranty; and thereby did justice ... Besides that experience, there have been many cases since I have sat in this court where we have readily held a representation ... to be a warranty sounding in damages.
Nowadays, since damages for negligent misrepresentations are now available, the decision as to which action will be the most appropriate to press will depend mainly on the type of statement (is it a statement of fact?) and on the remedy which is being sought (is rescission of the contract required, or will damages be adequate?). If the statement cannot be constructed as being of fact, then collateral contract may be the best remedy to pursue. On the other hand, if rescission rather than damages is what is important, the contractual action for misrepresentation is the only one which will provide this.