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Misrepresentation in SPA Disputes

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 –

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Misrepresentation in SPA Disputes

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  1. Misrepresentation in SPA Disputes Undergrowth, Boilerplate and Statutory Control David Drake

  2. 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

  3. Boilerplate • (Acknowledgement of) No-Reliance clauses • Designed to prevent misrepresentation claims • Entire Agreement clauses • Designed to prevent collateral warranty claims

  4. No-Reliance clauses: the common law • Evidential estoppel? • Watford Electronics v Sanderson [2001] All ER (Comm) 696 CA • Contractual estoppel! • First Tower Trustees Ltd v CDS (Superstores International) Ltd [2019] 1 WLR 637 CA

  5. 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.

  6. 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.”

  7. 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]

  8. 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

  9. 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

  10. 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]

  11. 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

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