Tort of Deceit

Fraud or fraudulent misrepresentation or misstatement is where a fake statement is made to a person upon which that person relies and as a consequence of relying on that statement suffers some damage. In the case of fraudulent misrepresentation is a question in tort under the common name of deception[1]. Since this is a civil action, will always be between two individuals – in many cases the applicant will be a private company.

It occurs when someone intentionally lie to person about the potency of an object that the person depends on, which put the person at a jeopardy because the depended on the objects performance. If a person tells someone that a crane can lift 10000 pounds, and he buys the crane knowing that he has to carry 9000 pounds, but in fact the crane only lifts 2000 pounds, that person can sue the other person on the basis of the tort of deceit.

The intent provides a civil remedy for a person to bet on a misrepresentation to their detriment, and requires the following to demonstrate:

• Someone made a representation to the part which is wrong[2]
• the person knows is false or true, it is bold
• No need for simulation and
• the loss is suffered as a consequence[3]

 Example of Deceit

A clear example of when the tort of deceit will come into play is where an individual has made a false insurance claim to their insurer in the case of motoring accidents. If for example they claim that another party has damaged their vehicle in a collision but in fact it was their own fault and the original statement has caused the insurance company to pay out then that individual would be liable to the insurance company under the tort of deceit.

THE MISREPRESENTATION MUST HAVE INDUCED THE CONTRACT

The misrepresentation must have induced the representee to enter into the contract. The requirements here are that (a) the misrepresentation must be material and (b) it must have been invoked.

(A) MATERIALITY

The misrepresentation must be material, in the sense that it would cause a reasonable person to conclude the contract. However, the rule is not strictly objective:

According to the article the judge referred that, any untrue statement that causes a person to enter into a contract should be grounds for termination. If the misrepresentation would lead a reasonable person to conclude the contract, the court presumes that the representee was so induced, and the onus will be on the representor to show that the representee did not rely on the misrepresentation carried out, wholly or in part. If, however, the misrepresentation would have induced a reasonable person to the contract, the burden will be on misrepresentee to show that the misrepresentation induced to act as he did.[4]

 (B) RELIANCE

The recipient must have relied on the misrepresentation.

• There will be no recourse if the misrepresentee was not aware of the false statement
• There will be no recourse if the representee does not rely on the misrepresentation, but on his own judgment or investigations.
• There is also addressed whether the misrepresentee are given the opportunity to discover the truth, but not accept the offer.
• The misrepresentation will always be seen as an incentive.
• There is also addressed whether the misrepresentation was not the incentive for the representee to enter into the contract

TYPES OF MISREPRESENTATION

A false statement was made, it is necessary to consider this type of misrepresentation has been made. There are three types of misrepresentation: fraudulent, negligent and totally innocent

 (A) FRAUDULENT MISREPRESENTATION

Fraudulent misrepresentation was defined by as a false statement that is made (i) knowingly, or (ii) without belief in its truth, or (iii) recklessly, careless as to whether it be true or false. Therefore, if someone makes a statement which they honestly believe is true, then it cannot be fraudulent.

(B) NEGLIGENT MISREPRESENTATION

This is a false statement made by a person who had no reasonable grounds for believing it to be true. There are two possible ways to claim: either under common law or statute.

(i) NEGLIGENT MISSTATEMENT AT COMMON LAW

Success depends on proof of a special relationship between the parties. This obligation can arise in a purely commercial, representing him (or pretends to have) a certain skill or knowledge and who knows (or is it reasonable to assume for him) that the representee will rely on the representation. [5]

(ii) NEGLIGENT MISREPRESENTATION:

“When a person has a contract after a misrepresentation has been made for him by another part of it and therefore it has suffered loss, then, if the person who made the false statement is liable for damages respect thereof had the misrepresentation been made fraudulently, that person shall be liable notwithstanding that the misrepresentation was not made fraudulently, unless he proves that he had reasonable grounds to believe and did not think the contract is concluded that the facts represented were true. “[6]

This provision does not require that the representee to establish a duty of care and reverses the burden of proof. Once a party has demonstrated that there was a misrepresentation that induced him to sign the contract, the person who made the false statement is liable for damages unless he proves that he had reasonable grounds to believe and not believe that the facts represented were true.

(C) WHOLLY INNOCENT MISREPRESENTATION

This is a false statement which the person makes honestly believing it to be true.

Elements of the Claim – There are four elements of tort which are given below-

(i)     False Representation

There must be a statement or a statement that expresses a representation that is false. A statement that, of course, implies something is said that, given that all behavior is to wear a uniform or dress code of some sort, which should be included. Maintain silence would not be considered a false statement.[7]

(ii)   Of a fact

The misrepresentation or misstatement must be in relation to a specific fact, example is the facts of the motoring case. Statements of opinion or intention therefore do not fall within the definition of a false misrepresentation.[8]

(iii) Knowing or reckless as to whether the statement is false

Enough for their injustice, deceit, is guilty of an act was not negligent in this case, or false (that is without reason, but it is to believe). It was decided, at random, or that the accused is to know the truth. Nothing less is sufficient.This is of course a subjective test as it is relating to the defendants actual knowledge and state of mind.[9]

(iv) There was reliance upon the representation

Representation does not need to have been the only reason for further action leading to the loss – just to have been the subject in that it was one of the factors which together have led during of the action.[10]

Damage

A claimant must demonstrate that he suffered a loss because of their dependence on the misrepresentation. In common with other areas of law, damages are monetary compensation. Damage is mainly compensatory in nature so that the applicant is placed in the position they would have been if the act or omission which was contrary to the law had not taken place. Damages are sought by the plaintiffs in litigation, and the action is to compensate the innocent party money for losses incurred by the specific breach of the law. Special rules for the assessment of damages apply depending on the area of law that the plaintiff has established the defendant’s liability. For example, damages for breach of contract are assessed with the reference point of date of contract, in tort, damages are measured on the date the offense was committed, in violation of intellectual property rights, damages are awarded for losses incurred by the owner of property rights in reference to the abuse of intellectual property rights without the consent of the owner intellectual.[11] Once proceedings have been issued, the defendant must comply with strict timetables. If the defendant does not file an acknowledgment of receipt within 14 days after service of the application form (provided it is accompanied by the particulars of claim) or file a defense within 28 days after service of the form application, the applicant may apply for judgment in the case.[12]

REMEDIES FOR MISREPRESENTATION

Once an actionable misrepresentation has been established, it is then necessary to consider the remedies available to the misrepresentee.

(A) RESCISSION

Cancellation, termination, it is possible in all cases of misrepresentation. The purpose of withdrawal is to put the parts in their original position, as if the contract had not been done.
The injured party may terminate the contract by notifying the representor. However, this is not always necessary to indicate that any act of repudiation, eg to warn the authorities, may be sufficient.[13]

BARS TO RESCISSION:

Rescission is an equitable remedy and is awarded at the discretion of the court. The injured party may lose the right to rescind in the following four circumstances:

(i) AFFIRMATION OF THE CONTRACT

The injured party will affirm the contract if, with full knowledge of the misrepresentation and of their right to rescind, they expressly state that they intend to continue with the contract, or if they do an act from which the intention may be implied. [14]

Note that in, the Court of Appeal held that the plaintiff had not lost his right to agreement because, knowing of the facts which afforded this right, he proceeded with the contract, unless he also knew of the right to make a law. The defendant here did not know he had such right. As he did not know he had such right, he could not be said to have elected to affirm the contract.[15]

(ii) LAPSE OF TIME

If the injured party does not put in place actions to terminate within a reasonable time, the law will lost. Where the misrepresentation is fraudulent, the time begins from the time the fraud was or with reasonable diligence could have been discovered. In case of non-fraudulent misrepresentation, the time from the date of the contract, nor the date of discovery of the false statement.[16]

 (iii) RESTITUTION IN INTEGRUM IMPOSSIBLE

The injured party will lose the right to rescind if substantial restoration is impossible, ie if the parties cannot be restored to their original position.[17] Accurate restoration is not necessary and that the remedy is still available if strong recovery is possible. Thus, the deterioration of the condition or value of the property is not a bar to remove.

 (iv) THIRD PARTY ACQUIRES RIGHTS

If a third party acquires rights in property, in good faith and for value, the misrepresentee will lose their right to make agreement. Thus, if X obtains goods from Y by misrepresentation and sells them to Z, who takes in good faith, Y cannot later rescind when he discovers the misrepresentation in order to recover the goods from Z.

(v) NOTE:

The right to agreement the contract will also be lost if the court exercises its discretion to award damages in lie of rescission under s2(2) of the Misrepresentation Act 1967.

For innocent misrepresentation two previous bars were abducted by the cancellation of the false statement s1 Act 1967: misrepresentee may cancel, despite the misrepresentation becomes a term of the contract s1 (a)), and misrepresentee may cancel, even if the contract was executed s1 (b)). Typically, this is the case for land sales contracts and leases.

 (B) INDEMNITY

An order of withdrawal may be accompanied by the court to order compensation. This is a payment of money by misrepresentor for expenses necessarily created under the terms of the contract and is different from damage.[18]

 (C) DAMAGES

(i) FRAUDULENT MISREPRESENTATION

The injured party may claim damages for false statement to the offense of fraud. The purpose of damages is to restore the victim to the position it occupied before the representation was made. The test of remoteness in deceit is that the injured party may recover all damages suffered as a direct result of a fraudulent statement, regardless of ability to predict. In addition, damages may include lost opportunity costs such as lost profits.

If we return to the previous example of a false insurance claim made from a car accident, we can see the damage that might be following request:
• Damage from the time taken by insurers claims department and investigators to process and investigate  allegations
•The     sums     paid      by        the        insurer
• Repair costs on the insured’s vehicle who made the false claim
• Payments that have already been made to the individual through their policy
• The punitive damages

EXCLUDING LIABILITY FOR MISREPRESENTATION

Any term of a contract which excludes liability for misrepresentation or restricts the remedy available is subject to the test of reasonableness.

“If a contract contains a clause that would exclude or restrict:
a) any liability which a party to a contract may be subject by reason of a misrepresentation made by him before the conclusion of the contract;
b) any remedy available to the other party to the contract because of such misrepresentation,
This term must be empty, except to the extent that satisfies the requirement of reasonableness, as shown in S11 (1) of the Unfair Contract Terms Act 1977 and for those who argue that the term satisfies the requirement to demonstrate that it is. “[19]

Section 11(1) UCTA 1977 provides that “the term shall have been a fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made.”

 Defense against a claim for deceit

Contributory Negligence

Contributory negligence is where it is stated that the appellants’ negligence is another reason that has been damaged. This defense is not available for the offense of fraud as has been stated under section 1 (1) and 4 of the Law Reform (Contributory Negligence) Act 1945, that this defense cannot be invoked to an offense that is an unlawful and intentional. As this is an act of negligence in deliberately mislead someone, then there is no way that man could have used a deliberate misrepresentation by example.

 Example of Insurance Claims

Often, insurance companies must develop applications where they may believe that a misrepresentation was made, and instead to rely on fraud, it is often better for them to go on the front foot and also the processing of claims for damages already paid in respect of fraudulent misrepresentation.

Declaration Proceedings

Statement of the procedure to allow others who have not submitted a complaint to be lodged in the proceedings. This could be the driver or passenger of the vehicle for the initial application. Candidates who claim to be waiting in the background while the application is made may be compelled to take proceedings against their will. The best example of this is the case, there were a number of people involved, they give a little different stories, but one of them decided to appeal.

Applications for the registration procedure can be brought to the following examples of behavior:
• Some people who complain are not the occupants of the car when the accident
•The     incident was      staged  or         artificial
• If a certain person was in the car when the accident occurred, but was not actually injured

The best example of where the declaration procedure is used most frequently is where the process of insurance problems were by the driver, but there is a fraudulent passenger demand in the background, for example , the passenger has not been in machine when an accident.
If the declaration procedure is then laid against the passenger must be present to defend the rights of the insurance company that was not really in the car.

Conclusion

A tort allows a person, usually the victim, to obtain a remedy that serves their own purposes. For example, payment of damages to a person injured in a car accident, or an injunction to stop a person interfering with their activities. Many jurisdictions retain elements of liability for punitive damages, for example in anti-trust violations and related consumption, making tort blur the line of criminal acts. There are also situations where, particularly if the defendant ignores the orders of the court, the plaintiff may obtain a punitive remedy against the defendant, including imprisonment. Some offenses may have a public element. For example, public nuisance and sometimes actions in tort will be brought by a public body.

Bibliography

AWB Simpson, ‘The Story of Sturges v. Bridgman: The Resolution of Land Use Disputes  Between Neighbors’ in G Korngold and AP Morriss, Property Stories (2nd edi Foundation Press, New York 2009)

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from http://en.wikipedia.org/wiki/Tort_law

Wikipedia May 24 2010, Tort of Deceit. Retrieved March 20, 2012 from

http://en.wikipedia.org/wiki/Tort_of_deceit