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GAZETTE
JULY-AUGUST
1979
Statutory Reform of the Law of
Misrepresentation
by ROBERT CLARKE
In this article the author intends to examine the effects
the Sale of Goods and Supply of Services Bill 1978 has
on the general law of misrepresentation.
Whilst the Draftsman has relied heavily upon terms of
the English Misrepresentation Act 1967, the Site of
Goods and Supply of Services Bill 1978 however does
not have as wide an ambit and it is suggested that the
provisions of the 1978 Bill should be extended into areas
of Irish law which have not been included within the
ambit of the recent Bill.
Part V of the Bill is headed "Misrepresentation" and
comprises four sections. Section 40 provides:
"In this Part 'contract' means a contract for the sale of
goods, a hire purchase agreement, or a contract for the
supply of a service."
This provision, whilst understandable in the context of a
piece of legislation designed primarily, though not ex-
clusively, to amend the law relating to sale of goods, hire
purchase and services contracts, immediately reduces the
scope and importance of this part of the Bill.
Section 41 of the Bill is designed to remove certain bars
to the right to rescind a contract which has been induced
as the result of an innocent misrepresentation, that is, a
representation that was not made fraudulently within the
test laid in
Derry v. Peek(
1889) 14 App. Cas. 337. This
section, which corresponds with Section 1 of the 1967
English Act provides: "Where a person has entered into a
contract after a misrepresentation has been made to him,
and (a) the misrepresentation has become a term of the
contract, or (b) the contract has been performed, or both,
then if otherwise he would be entitled to rescind the
contract without alleging fraud, he shall be so entitled,
subject to the provisions of the Act of 1893 and this Bill
notwithstanding the matters mentioned in paragraphs (a)
and (b)".
Thus, Section 41(a) attempts to clarify the vexed but
underlitigated question of whether the incorporation of a
misrepresentation into a contract, either as a condition or
a warranty, subjects the misrepresentation to the limita-
tions that attach to a contractual term
qua
a condition or
qua
a warranty. In other words once a misrepresentation
takes on the status of a contractual term does it, strictly
speaking, cease to be a misrepresentation giving rise to a
right to repudiate?
Benjamin's Sale of Goods
(1974)
paragraph 758 suggests that the better view is that the
right to repudiate would be subject to the rules relating to
contracts for the sale of goods because the equitable rules
on misrepresentation and the right to repudiate were
developed simply to fill a lacuna in the law. Under Section
41(a) then the limitations on the right to repudiate turn
upon the Act of 1883 as amended by the 1979 Bill itself,
in particular, Section 11 of the 1893 Act which caused
several difficulties and which 9 is now proposed to amend
so as to allow a greater degree of flexibility to a judge
faced with an action involving recission of a contract.
Section 11(3), as amended, provides: "Where a con-
tract of sale is not severable, and the buyer has accepted
the goods, or part thereof, the breach of any condition to
be fulfilled by the seller can only be treated as a breach of
warranty and not as a ground for rejecting the goods and
treating the contract as repudiated, unless there be a term
of the contract, express or implied, to that effect."
While this amended section 11 no longer precludes re-
cission of a contract for specific goods simply because
property has already passed, acceptance of the goods or a
part thereof under a non- severable contract will preclude
rescission unless an express or implied term to the con-
trary can be found. "Acceptance", the key to the
amended Section 11 is defined in Section 20 of the 1978
Bill (which amends S. 35 of the 1893 Act) as an intima-
tion from the buyer that he has accepted the goods or any
act in relation to the goods inconsistent with the owner-
ship of the seller, for example sale or pledge by the pur-
chaser. Further, if after a reasonable time the buyer
retains the goods without intimating rejection (See
Leqf
v.
International Galleries
[1950] 2 KB 86) that will be
deemed acceptance.
Thus in contracts for the sale of goods there are clear
limitations upon the right to repudiate a contract for mis-
misrepresentation. However, the terms of Section 11 do not
extend into contracts of hire purchase or for the supply of
services. Such a contract may still be capable of being set
aside notwithstanding lapse of time if induced by a
misrepresentation.
Leqf
v.
International Galleries (supra)
does not apply the doctrine of laches but a separate rule
adapted from Sections 11 and 35 of the Sale of Goods
Act.
The rule in Seddons case
Section 41(b) of the 1978 Bill attempts to repeal the
doctrine first countenanced in
Wilde v. Gibson
(1848) 1
H.L. Cas. 605 at 632-3 by Lord Campbell who stated
that "where the conveyance has been executed . .. a court
of equity will set aside the contract only on the ground of
actual fraud." This doctrine was subsequently developed
and applied to all executed contracts and became known
as the arbitrary rule in
Seddon v. North Eastern Salt Co.
Ltd.,
[1905], 1 Ch. 326. The rule in
Seddon v. North
Eastern Salt Co. Ltd.
was applied in Ireland in
Lecky v.
Walter
[1914] I.R. 378. In that case the plaintiff pur-
chased bonds issued by a dutch company as the result of
a misrepresentation made by the defendant's agent who
stated that the bonds were fully secured and charged
against the companies assets. The bonds were not so
secured and were described by the court as virtually
worthless. The plaintiff brought an action claiming
rescission of this executed contract. The action failed for
it was said that an executed contract, whether for land or
chattels cannot be rescinded on the grounds of innocent
misrepresentation. An executed contract can only be
repudiated if the representation is fraudulent or if there
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