Misrepresentation – something to grouse about

August 2014

Rating system:

Reading time (1-10 minutes): 1

Sophistication level (1 (idiot) – 10 (expert)):4

Entertainment value (1 (turgid) – 10 (side-splitting)):5

In this case a Mr Erskine was looking to hire a grouse moor for commercial shooting. The hirer (‘VR’) overstated the number of grouse (or grouses; but not grice). Mr Erskine later set up a separate entity, Cramaso LLP, which entered into the contract. The grouse shortage was discovered and Cramaso sued VR for misrepresentation. Did it succeed, bearing in mind that it didn’t even exist when the representation was made?

Answer: yes. The Supreme Court said that where a statement had a continuing effect, the person making it continues to be responsible for its accuracy. Although the statement was made to Mr Erskine and not Cramaso, Mr Erskine was Cramaso’s agent. VR owed a duty of care to Cramaso about the accuracy of the statement. Because VR breached this duty of care Cramaso was entitled to damages for negligent misrepresentation.

Advice:

• Be careful what you say in discussions leading up to any contract.
• If in doubt, put a clause in the contract saying that it reflects the entire agreement between the parties and that the parties haven’t relied on any representations made by each other.
• If you have relied on a representation, don’t agree this clause, or ideally add a warranty in the contract itself.

Case: Cramaso LLP v Viscount Reidhaven’s Trustees [2014] UKSC 9