Forgot your password?

Fraudulent Inducement: Misrepresentation in DODs

By Edited Mar 28, 2016 0 0

If you have been reading about Fraudulent Inducement as well as Misrepresentation, you might come across the terms duty of disclosure or otherwise known as uberrimae fidei which actually means contracts of utmost good faith. This is a very small bunch of contracts where this duty is imposed on those who enter in the contract but there are now very few such examples, in the past a person who is seeking insurance contracts might have a duty of disclosure in relation to pertinent facts before entry into insurance. Another such instance would be where one party enters into a fiduciary (meaning related to money matters) relationship with another and it involves trust and confidence in the other party, who is then subject to a duty of disclosure (DOD).

This is a rare exception to the general stance that the common law usually takes about the existence of this need to disclose facts that arises in scenarios of asymmetric knowledge. Usually something more than an omission to mention of that very special fact is required to bring it over the gates in which the other party is expected to make some disclosure, and is to be inferred from the factual matrix and unique context of the case. This is all the more so if the other guy has been rather malicious or made a conscious act to hide or conceal a material fact about the contract matter from you.

Recently, even a half non-truth by only disclosing part of the truth can lead to misrepresentation. Every single word may be true but if something is left out that would change the meaning entirely he would possibly be making a false statement. This is common especially in the case of distorted truths were some seller might tell you he has never had any problems driving the car, except when he doesn't tell you that he has never driven the car ever and thus has no idea of any problems at all. That is a really very cunning way of doing things and thankfully for us we are to a limited extent protected from that. It is no help if you already knew about the misrepresentation but entered into the contract regardless although there are of course certain qualifications. And also, believing that all used car salesmen are liars probably won't harm your case.

In your particular scenario, you may have to refer to past precedents to see whether the rare exceptions have similarities to you. Many times representations can be implied from the conduct of the other party, as well as your own. It is also helpful if the other side has engaged in actions that borders upon the fraudulent like concealing faults like leaving a ship in water instead of a dry dock so that a broken keel and a worm eaten hull could be concealed. This can amount to be a fraudulent misrepresentation or fraudulent inducement as was the case in Schneider v Heath as well as Gordon v Selico where a misrepresentation was ruled when dry rot was covered up in the house before it was made for sale. If your case appears to be like this, then it might be a good idea to consult your lawyer if your attempt at prior arbitration and negotiation fails.

More recently there has been a slow trend towards making a distinction between 'dishonest non-disclosure' not so many years ago and a pure non disclosure in which nothing is said at all. Depending on the skill of the litigators involved in the verbose tug of war over the case that might lead to different conclusions for very similar facts. A dishonest silence has yet to be easily considered a fraudulent inducement, but it might put a neutral observer towards your side of the events. It is of course best to seek consultation from a professional in your particular territory first before making claims.

One more point to note is something about disclosures that might be relevant in your day to day life. Take care before making representations that while true restricted to its very basic facts but might give the impression of there being other statements. This could be one such case where some representations had been made at the start of the contract was true, but is no longer the case by the time the contract was concluded.

Duty of disclosures have however been far more recognized in some other countries, but the common law operates on different forms of change and it might not be the best thing to formally recognize its presence as of yet.

For example if someone was trying to sell you a business that was making 20,000 a month, but perhaps later due to reputation difficulties or being incapacitated the business was lowered to 2500 a month but did not inform you about this then that might be cause for you to look for some way to rescind the contract provided you still entered into it thinking it was 20,000 a month and that the other person already knows that what he has told you was no longer true and he would then need to disclose that new knowledge without which you might perhaps then be able to set the contract aside and avoid it. A vague duty arises to correct the prior misrepresentations, as was vaguely glossed over in the case of Spice Girls v Aprilia. How the coin ends up in the case is of course indeterminate. It may be easier if a duty of disclosure was legally recognized in the future.

Law and practices however changes with time as well as the geographical location you happen to find yourself in and if you do come afoul of such people, it is really best to seek expert assistance from the services of a professional.

Any liabilities arising is specifically disclaimed. The content above is not to be taken as engaging in the rendering of legal or financial or other advice.

It is not guaranteed that the items referred to is accurate or up to date.



Add a new comment - No HTML
You must be logged in and verified to post a comment. Please log in or sign up to comment.

Explore InfoBarrel

Auto Business & Money Entertainment Environment Health History Home & Garden InfoBarrel University Lifestyle Sports Technology Travel & Places
© Copyright 2008 - 2016 by Hinzie Media Inc. Terms of Service Privacy Policy XML Sitemap

Follow IB Lifestyle