The law relating to recovery of damages for misrepresentation is difficult to state and even harder to

justify.

The possible remedies for the misrepresentation are damages and recission. Damages can be claimed
under tort for fraudulent and negligent misrepresentation. Damages are covered by both common law
and statue. In common law, the damages are recoverable under the tort of deceit. The statutory
authority covering such damage is s.1 and s.2 of the misrepresentation act 1967. However, the damages
to be awarded are to be judged according to the type of misrepresentation made. We shall consider
what damages are conferred by common law and statute respectively and what problems these
approaches pose.

In common law, the damages for fraudulent misrepresentation is to bring both parties to a position
where they would have been made if the representation had not been made. However, the burden of
proof is on the representee to show that the representor had made a false representation knowingly
without belief in the truth of the statement. This test was stated by Lord Herschell in Derry v Peek.
Additionally, the representor is also liable for the any consequences that have occurred as a result of
fraudulent misrepresentation whether or not they are foreseeable. This was established in Doyle v Olby,
where the claimant fell into debt due to a bad business, he had entered because of negligent
misrepresentation made by the defendant as to the profit potential. The courts enforced the order that
the claimant, in addition to receiving back his purchase payment, was liable to get the amount required
to pay off the debt. It the test is satisfied; the courts would seek to protect the reliance interest of the
representee. The courts may also enforce an order for exemplary damages as in Kuddus v Chief
Constable of Leicestershire constabulary.

For negligent misrepresentation, the courts shall seek to put the parties in a precontractual position
with the representor being liable for all the consequences that are foreseeable in the face of
representation. However, for negligent misrepresentation, if the fault of the offeree is found then
courts will tend to reduce the award of damages based on contributory negligence. However, the award
of exemplary damages in negligent misrepresentation is an exception as compared to fraudulent
misrepresentation.

However, a conflict arises when claiming the damage under statue. The conflicting arguments are that
the award of damages shall be such as to put the claimant in a position had the representation been
true thus serving to protect the expectation interest while the other argument is that it should protect
the reliance interest. Lord Denning had appeared to support the former approach in the case of Gosling
v Anderson and Jarvis v Swan’s tour. However, this approach is rejected in favor of the reliance measure
in Roy Scott v Rogerson. The plausible justification for adopting this approach is that the mis-representor
asserts the truth of his statement and thus demands the reliance of the representee. The courts are of
the view that the reliance measure can include the loss of profits that would have attained if the party
had taken other possible opportunities in the absence of misrepresentation. However, the damages
under s.2(1) shall be assessed under the tort of Deceit under which the contributory negligence may
tend to limit the damages.

For innocent misrepresentation, damages were not available as it does not fall under the tort. Thus, the
remedy that can be claimed is recission. However, in practice the courts have reduced the severity of
the rule by insisting the representation be made as a separate collateral contract. This view was cleared
in De Lassalle v Guildford where representation made that the drains were in good condition was held to
be enforceable as a separate collateral contract of which the consideration was made by entering into
lease agreement.

However, the need to find a separate collateral contract is reduced by s.2(2) of the Misrepresentation
Act, giving the courts the discretion to award damages instead of recission. An important thing to note is
that the award of damages is not a right and the party cannot rescind the contract and claim damages
simultaneously and the courts would likely use it when they find it equitable. In practice, the courts have
made use of this section when they find that the party has entered a bad bargain. In William Sindall plc v
Cambridge shire, the court were of the view that damages could be awarded had the innocent
misrepresentation been established as the loss suffered by the claimants was trivial as compared to the
loss suffered by the claimants had the contract been rescinded.

Another problem to be considered is what would be the measure of damage under s.2(2). Hoffmann LJ r
that damages should not exceed more than the amount had the misrepresentation made was of the
warranty but Evan’s LJ that the award shall be made by taking into account of the difference in price
value of the loss caused by the misrepresentation and the actual value that could have been attained it
the representation been true. However, it is assumed that the courts will seek to enforce damages for
the loss of value, but any consequential loss will not be awarded.

Another important thing to be considered is that the damages under s.2(2) will not be awarded if the
right to rescind is lost following any limitation like affirmation, lapse of time.