Misrepresentation in SPA Disputes: Undergrowth, Boilerplate, and Statutory Control
Claimants in misrepresentation disputes often struggle through obscure details to build their claims. Boilerplate clauses like No-Reliance and Entire Agreement aim to prevent such claims. Legal principles like contractual estoppel can bind parties to false statements. Statutory control under the Misrepresentation Act 1967 applies to non-consumer contracts, ensuring reasonableness in liability exclusion terms.
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Misrepresentation in SPA Disputes Undergrowth, Boilerplate and Statutory Control David Drake
Undergrowth? Would-be claimants (and their lawyers) in misrepresentation claims tend to find themselves threshing through the undergrowth and finding in the course of negotiations some (chance) remark or statement (often long forgotten or difficult to recall or explain) on which to found a claim Inntrepreneur Pub Co v East Crown Ltd [2000] 2 Lloyd s Rep 611, [7] per Lightman J
Boilerplate (Acknowledgement of) No-Reliance clauses Designed to prevent misrepresentation claims Entire Agreement clauses Designed to prevent collateral warranty claims
No-Reliance clauses: the common law Evidential estoppel? oWatford Electronics v Sanderson [2001] All ER (Comm) 696 CA Contractual estoppel! oFirst Tower Trustees Ltd v CDS (Superstores International) Ltd [2019] 1 WLR 637 CA
First Tower: contractual estoppel Parties can bind themselves to a particular state of affairs, present or past, even if they know it to be untrue, by contractual estoppel ([47]-[48]). Does appropriating the term estoppel confuse matters? Binding force is dependent on promise, rather than reliance. Leggatt LJ question[ed] ([94]) whether a clause by which one party acknowledges absence of reliance sufficiently clearly expresses such an agreement but proceeded on the basis of the different view taken in Springwell Navigation Corp v JP Morgan Chase Bank [2010] 2 CLC 705 CA.
Statutory Control Misrepresentation Act 1967 s 3(1) applies to non-consumer contracts: If a contract contains a term which would exclude or restrict (a) any liability to which a party to a contract may be subject by reason of any misrepresentation made by him before the contract was made; or (b) any remedy available to another party to the contract by reason of such a misrepresentation, that term shall be of no effect except in so far as it satisfies the requirement of reasonableness as stated in section 11(1) of the Unfair Contract Terms Act 1977; and it is for those claiming that the term satisfies that requirement to show that it does.
First Tower: application of s 3(1) Whether s 3(1) applies is a question of statutory, not (just) contractual interpretation: First Tower, [49]-[57] Is there an exclusion or restriction of liability? Prima facie requires a but-for test: First Tower, [41]
First Tower: qualified representations Qualification of content: The clock reading [on a car being sold] is 20,000 miles, but I have no knowledge whether the reading is true or false Attempts to negate status as an actionable representation: I have serviced the car since it was new, it has had only one owner and the clock reading is accurate. but those statements are not statements on which you can rely. No-Reliance clauses are characteristically in the latter category
First Tower: Primary obligations clauses Does a provision that meets the but-for test simply delimit the primary obligations under the contract [42]-[44]? When, if at all, should the term basis clause be used? In relation to misrepresentation, a term in the very contract induced by the misrepresentation that meets the but-for test will always be an exclusion clause: [97]-[98], [109] per Leggatt LJ
Statutory Control Reigns Supreme? Theoretically possible, but practically unlikely, to outflank s 3(1) by means of an evidential estoppel: First Tower, [59], [61] Party would probably have to overtly endorse the statement that they are not relying on any pre- or non-contractual representations Why? Because the counterparty must genuinely act on that endorsement, and the court must treat the party as having intended them to do so: Watford Electronics v Sanderson [2001] All ER (Comm) 696 at [39]-[41]
Entire Agreement clauses: Lightman J rules Clause works by denud[ing] what would otherwise constitute a collateral warranty of legal effect Inntrepreneur, [7] Endorsed obiter in MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2018] 2 WLR 1603 SC, [14] Appears fatal for any collateral warranty argument short of a parallel agreement completely independent of the main contract, and supported by its own consideration
