TO WHAT EXTENT HAS S.

15 (1) OF THE CONTRACTS ACT MODIFIED THE COMMON LAW

CONCEPT OF MISREPRESENTATION.

Misrepresentation in common law is a positive assertion as to the facts. In Fred Nuwagaba v Ade

Musana Kagumaho, court held that “a misrepresentation is a positive statement of fact, which is

made or adopted by a party to a contract and is untrue. It may be made fraudulently, carelessly

or innocently. And that where one person (the representor) makes a misrepresentation to another

(the representee) which has the object and result of inducing the representee to enter into a

contract or binding transaction with him, the representee may generally elect to regard the

contract as rescinded.” It is clear from the above that the courts consider misrepresentation to be

something that is stated to another party to induce that party to enter into a contract with the one

making the representation. The statement has to be untrue as to the facts. The statement may be

fraudulently, carelessly or innocently made, this is material as it determines the remedies to be

made.

The point that a party must rely on the misrepresentation to enter into the contract with the one

making the statement was emphasized in Non-Performing Assets Recovery Trust v S.r Nkabula

and Sons Limited. In examining the evidence, court found that the respondent indeed carried out

their own due diligence and from that made the decision to use steyr tractor in lieu of the Massey

Ferguson tractor they had earlier requested, the respondent could therefore not say that the

appellant’s misrepresentation led them into the contract.

Furthermore, the courts have been keen to make a distinction between statements of fact and

statements of opinion. In the deciding on misrepresentation the courts insist that the statement

has to be a statement of fact. This is the position in Bisset v Wilknson. In the case, court
considered ‘material facts of the transaction, the knowledge of the respective parties and their

relative positions, the words of representation used, and the actual condition of the subject-matter

spoken of’, from examining these, the court came to the conclusion that there was no evidence

that the land had ever held a sheep farm and that the respondent had not proved that the land

could not hold the 2000 sheep talked about. Therefore the statements of the appellant were found

to be mere opinions that could not constitute misrepresentation as they were no evidence to

prove or disprove them.

Similarly, a statement as to the person’s state of mind might be considered a statement of fact.

This was the position held in Edgington v Fitzmaurice. The facts of the case were such that the

plaintiff purchased shares in the company where the defendants were directors. The defendants

had issued a prospectus for debentures claiming the money would be used for the purchase of

vans, horses and the repairs of buildings, later on it came to light that the defendants indeed

intended to use the money to pay off liabilities and soon the company went into liquidation. The

defendants argued that the statement in the prospectus referred to future plans and so could not

be construed to be a misstatement, furthermore that the plaintiff was mistaken in believing that

the purchase of debentures would entitle him to a charge on the company’s property. The court

held that the statement in the prospectus amounted to a statement of the mind of the directors.

Though the plaintiff did not rely only on that statement but also on his own belief that he would

have a charge on the company’s property, this was immaterial as the wording in the prospectus

was an important inducement to contract. Court held that the defendants were liable for

misrepresentation.
On the nature of misrepresentation, the courts have been keen to establish differences in the type

of misrepresentation, consequently, the courts tend to distinguish between fraudulent

misrepresentations, negligent misrepresentation and innocent misrepresentation.

The courts have defined fraudulent misrepresentation to mean, a false statement that is ‘made

knowingly, or without belief in its truth, or recklessly, careless as to whether it be true or false’.

This was the position taken in Derry v Peek. In this definition, the courts established a three part

test for misrepresentation, such that a party is fraudulent where he/she;

 Knows the statement to be false, or

 does not believe in the statement, or

 is reckless as to its truth.

The above discussion highlights the general principles in common law regarding

misrepresentation.

However, the Contracts Act 2010 has made some modifications to the above principles as is

discussed below.

Though the courts have defined a misrepresentation to be a positive statement, the Act has

modified this to include instance of silence in the form of concealment of facts especially where

the facts are material to the decision of the other party to enter into a contract.

s.15 (1b) of the Contracts Act 2010 ‘the concealment of a fact by a person having knowledge or

belief of the fact’ makes silence a ground for misrepresentation. This is in contrast to the general

principle in common law that silence is not misrepresentation.

This position is further stated in the Insurance Act 2017 s.142 that prohibits any person from

making misleading statements, concealing facts in the process of offering, and concluding

contracts with an insurer or any person in the insurance business.

Furthermore, s.15 (2), states that “For the purposes of this Act, mere silence as to facts likely to

affect the willingness of a person to enter into a contract is not fraud, unless the circumstances of

the case are such that, it is the duty of the person keeping silence to speak, or unless the silence

is, in itself, equivalent to speech.” This is the position court held in With v O’Flanagan.

s.16 (2) of the contracts Act 2010, states that “Where consent is caused by misrepresentation or

by silence which is deemed fraudulent within the meaning of section 15, the contract is not

voidable, if the party whose consent was obtained had the means of discovering the truth with

ordinary diligence.” This section means that a party to a contract needs to carry out due diligence

so as to allege misrepresentation when new information to his/her disadvantage arises.

Therefore , s.15(1) has modified the concept of misrepresentation is as far as it has made silence

in the form of concealment of facts an act constituting misrepresentation in exception of the

general principle at common law.