In an action of damages for fraudulent misrepresentation and breach of warranty, the plaintiff founded on a conversation between himself and the defendants’ representative. In this conversation the plaintiff said-‘I understand that you are bringing out a rubber company.’ The reply was-‘We are.’ The plaintiff then asked ‘if it was all right,’ and received the answer-‘We are bringing it out,’ to which he replied-‘That is good enough for me.’ He thereupon applied for and received an allotment of 5000 shares in the company at a premium, which subsequently fell in value. A jury having negatived fraudulent misrepresentation, but found that the company could not properly be described as a rubber company, and that the defendants had given a warranty to that effect, held that the intention to constitute a representation of the seller a warranty must be clearly proved, that the evidence put before the jury was insufficient to prove such intention, and should therefore not have been submitted by the judge to the jury as material on which to base a finding. The House considered the genesis of collateral contracts: ‘there may be a contract the consideration for which is the making of some other contract, ‘If you will make such and such a contract I will give you one hundred pounds’, is in every sense of the word a complete legal contract. It is collateral to the main contract.’ and
‘such collateral contracts must from their very nature be rare . . the more natural and usual way of carrying this out would be by so modifying the main contract and not by executing a concurrent and collateral contract. Such collateral contracts . . are therefore viewed with suspicion by the law. They must be proved strictly. Not only the terms of such contract but the existence of an animus contrahendi on the part of all the parties to them must be clearly shown.’ An innocent misrepresentation gives no right to damages.
Speaking as to De Lasalle v. Guildford: ‘With all deference to the authority of the Court that decided that case, the proposition which it thus formulates cannot be supported. It is clear that the Court did not intend to depart from the law laid down by Holt CJ. And cited above, for in the same judgment that dictum is referred to and accepted as a correct statement of the law. It is, therefore, evidence that the use of the phrase ‘decisive test’ cannot be defended. Otherwise it would be the duty of a judge to direct a jury that if a vendor states a fact of which the buyer is ignorant, they must, as a matter of law, find the existence of a warranty, whether or not the totality of the evidence shows that the parties intended the affirmation to form part of the contract; and this would be inconsistent with the law as laid down by Holt CJ. It may well be that the features thus referred to in the judgment of the Court of Appeal in that case may be criteria of value in guiding a jury in coming to a decision whether or not a warranty was intended; but they cannot be said to furnish decisive tests, because it cannot be said as a matter of law that the presence or absence of those features is conclusive of the intention of the parties. The intention of the parties can only be deduced from the totality of the evidence, and no secondary principles of such a kind can be universally true.’ It is of the greatest importance to ‘maintain in its full integrity the principle that a person is not liable in damages for an innocent misrepresentation, no matter in what way or under what form the attack is made.’
Investors in a new company claimed to have done so only on the basis of an alleged representation in the company’s name and by an intermediary that it was a rubber company. They sought damages when the company failed, saying that the representatin was a warranty.
Held: The appeal succeeded. The plaintiff had not shown that he had relied on any such representation, but rather on the general reputation of the appellants. Lord Moulton set out how to decide whether a clause was a warranty ‘The intention of the parties can only be deduced from the totality of the evidence’. The question whether a warranty was intended depends on the conduct of the parties, on their words and behaviour, rather than on their thoughts. If an intelligent bystander would reasonably infer that a warranty was intended, that will suffice. And this, when the facts are not in dispute, is a question of law.
Viscount Haldane LC, Lord Moulton
[1911-13] All ER 83, [1913] 82 LJKB 245, [1913] 107 LT 769, [1912] UKHL 2, [1913] AC 30, (1912) 107 LT 769, [1912] UKHL 642
Bailii, Bailii
England and Wales
Citing:
Cited – De Lasalle v Guildford CA 1901
When looking at a statement to see if a warranty was given: ‘In determining whether it was so intended, a decisive test is whether the vendor assumes to assert a fact of which the buyer is ignorant, or merely states an opinion or judgment upon a . .
Cited – Brownlie v Campbell; Brownlie v Miller HL 1880
Silence where there is a duty to speak, may amount to a misrepresentation. Lord Blackburn said: ‘where there is a duty or an obligation to speak, and a man in breach of that duty or obligation holds his tongue and does not speak, and does not say . .
Cited – Chandelor v Lopus 1603
The plaintiff sued for an alleged misrepresentation as to the character of a precious stone sold to him.
Held: The plaintiff must either declare on a contract, or if he declared in tort for a misrepresentation must aver a scienter. . .
Cited – Pasley v Freeman 1789
Tort of Deceit Set Out
The court considered the tort of deceit. A representation by one person that another person was creditworthy was actionable if made fraudulently. A false affirmation made by the defendant with intent to defraud the plaintiff, whereby the plaintiff . .
Cited – Medina v Stoughton 1699
. .
Cited – Peek v Derry CA 1887
The court considered an action for damages for deceit: ‘As I understand the law, it is not necessary that the mis-statement should be the motive, in the sense of the only motive, the only inducement of a party who has acted to his prejudice so to . .
Cited – Derry v Peek HL 1-Jul-1889
The House heard an action for damages for deceit or fraudulent misrepresentation.
Held: The court set out the requirements for fraud, saying that fraud is proved when it is shown that a false representation has been made knowingly or without . .
Criticised – De Lassalle v Guildford CA 1901
The court was asked whether a representation amounts to a warranty or not.
Held: AL Smith MR said: ‘In determining whether it was so intended, a decisive test is whether the vendor assumes to assert a fact of which the buyer is ignorant, or . .
Cited by:
Cited – Stewart v Perth and Kinross Council HL 1-Apr-2004
The claimant challenged refusal of a licence to sell second hand cars, saying that the licensing requirements imposed were outwith the Act under which they had been made. The licensing scheme imposed additional requirements.
Held: Though a . .
Cited – Hedley Byrne and Co Ltd v Heller and Partners Ltd HL 28-May-1963
Banker’s Liability for Negligent Reference
The appellants were advertising agents. They were liable themselves for advertising space taken for a client, and had sought a financial reference from the defendant bankers to the client. The reference was negligent, but the bankers denied any . .
Cited – Esso Petroleum Limited v Commissioners of Customs and Excise HL 10-Dec-1975
The company set up a scheme to promote their petrol sales. They distributed coins showing the heads of members of the English football team for the 1970 World Cup. One coin was given with each for gallons of petrol. The Commissioners said that the . .
Cited – Blackpool and Fylde Aero Club Ltd v Blackpool Borough Council CA 25-May-1990
The club had enjoyed a concession from the council to operate pleasure flights from the airport operated by the council. They were invited to bid for a new concession subject to strict tender rules. They submitted the highest bid on time, but the . .
Cited – Oscar Chess Ltd v Williams CA 11-Nov-1956
Where somebody warrants something, the person giving the warranty binds himself or herself to it. Lord Denning suggested that the test of an interpretation was what an intelligent bystander would reasonably infer contracting parties had agreed upon. . .
Cited – Evans and Son (Portsmouth) Ltd v Andrea Merzario Ltd CA 1976
The defendants had carried previously goods aboard ship for the plaintiffs. This time, they were asked for and gave an oral re-assurance to the plaintiffs that the goods would be carried below deck. This did not happen and the goods were swept . .
Cited – Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd CA 3-Mar-1965
When a person gives a promise or an assurance to another, intending that he should act on it by entering into a contract, and he does act on it by entering into the contract, it is binding.
Lord Denning MR said of a collateral warranty: . .
Lists of cited by and citing cases may be incomplete.
Contract, Torts – Other
Leading Case
Updated: 02 November 2021; Ref: scu.265974