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Pre-Contractual Misrepresentation And The Limits Of The Principle In with V. O’flanagan

Published online by Cambridge University Press:  08 April 2005

Rick Bigwood
Rick Bigwood*
Affiliation:
Research Centre for Business Law, The University of Auckland
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Extract

The English Court of Appeal decided With v. O’Flanagan in 1936. The case concerns the interesting phenomenon of “supervening falsification” within the law of pre-contractual misrepresentation. Such a phenomenon occurs when a representation, though perfectly true when made, and unknown to representee throughout, has nevertheless become substantially false by the time it induces the representee to enter into the contract in question. The problem of supervening falsification potentially arises whenever there is an (appreciable) interval of time between the moment when a representation is made and the time when the party to whom it was made (reasonably) altered his position on the faith of it.

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The Cambridge Law Journal , Volume 64 , Issue 1 , 24 March 2005 , pp. 94 - 125
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Copyright © Cambridge Law Journal and Contributors 2005

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Footnotes

This article draws on and develops material comprising a section of a wider study of mine into select uncertain areas of the law relating to pre-contractual misrepresentation: R. Bigwood, “Reflections on Partial-Truths, Supervening Falsification, and Pre-Contractual Misrepresentation” (2004) 10 N.Z.B.L.Q. 124. I am grateful to an anonymous C.L.J. referee for his or her generous comments on a draft version of this article.

References

1 [1936] 1 Ch. 575.

2 Supervening falsification thus involves a change in the facts between representation and reliance thereon. It must therefore be distinguished from the quite different situation where the representor learns of falsifying facts that, innocently unknown to him at the time, existed when the representation was initially made. Here, no question of supervening falsification arises, for there was an actionable misrepresentation to begin with, albeit of the non-fraudulent variety. The significance of the representor’s subsequently discovering his mistake, and failing thereafter to disclose the truth before the representee in fact acted upon the original statement, thus speaks singularly to the question of the type of misrepresentation made—whether it was an innocent or a fraudulent misrepresentation. Both situations, change-in-the-facts and discovery- of-the-truth, are exposited in Fry J.’s well-known dictum in Davies v. London and Provincial Marine Insurance Co. (1878) 8 Ch.D. 469, 475.

3 we can take it for granted that, much like a contractual offer, any representation having “continuing” operation only “continues”, or only is capable of inducing justifiable reliance, either according to its own terms or else for a reasonable time after it was made. After a reasonable time, the representation either lapses or is deemed (or found) not to have induced the complained-of detrimental action on the part of the representee. On the question of how long a “continuing” representation endures, see e.g., Furmston, M. (ed.), The Law of Contract (London 1999), p. 570 at para. 4.27Google Scholar.

4 See Misrepresentation Act 1967; Misrepresentation Act 1971 (S.A.); Law Reform (Misrepresentation) Act 1977 (A.C.T.); Contractual Remedies Act 1979 (N.Z.).

5 In other words, such legislation does not create legal sanctions for misrepresentation where none existed before. See e.g., Andre & Cie S.A. v. Ets Michel Blanc Fils [1979] 2 Lloyd’s Rep. 427, 435 per Geoffrey Lane L.J. (Misrepresentation Act 1967); Contracts and Commercial Law Reform Committee, Misrepresentation and Breach of Contract: Report (1978), p. 82 (Contractual Remedies Act 1979 (N.Z.)).

6 I elaborate below on the concept of “agency-responsibility” (see text accompanying nn. 37-40 below). In short, it signifies that the representor’s failure to withdraw or correct his earlier statement was relevantly related to choices that he made or was fairly capable of making before his “continuing”, and subsequently falsified, representation adversely affected the representee’s decision to contract. The concept thus presupposes some level of “awareness” by the representor of the changed facts affecting the accuracy of his original statement.

7 Although often loosely (and unwittingly) equated, “knowledge” and “notice” are not synonymous concepts. See e.g., Farrar, J.H. “Floating Charges and Priorities” (1974) 38 The Conveyancer 315, 319–321Google Scholar; D. Browne (ed.), Ashburner’s Principles of Equity (2nd ed., 1933), p. 59 (“Notice for the purpose of affecting conscience may be different from knowledge. If I have personal knowledge of a fact, I have notice of it; but notice is generally used in contradistinction to knowledge, and a person is said to have notice of a fact, not because he knows it, but because, for legal purposes, he is to be treated as if he knew it.”). The arguments in this article follow whether the representor: (a) actually knows, or to some extent suspects or is put on inquiry, of the supervening falsification of his original statement; or (b) is deemed in law to know of such falsification, even though he knew of no facts that would have put an honest and reasonable person on inquiry as to that relevant event. see also below n. 22.

8 I assume throughout that it is almost always better to recognise something for what it is rather than to fictionalise it. On the nature of, motivations for, and potential utility of legal fictions generally, see Fuller, L.L., Legal Fictions (Stanford 1967)Google Scholar.

9 Romer L.J. and Clauson J. agreed, although Romer L.J. states the principle in a slightly narrower form ([1936] 1 Ch. 575, 586): “If A. with a view to inducing B. to enter into a contract makes a representation as to a material fact, then if at a later date and before the contract is actually entered into, owing to a change of circumstances, the representation then made would to the knowledge of A. be untrue and B. subsequently enters into the contract in ignorance of that change of circumstances and relying on that representation, A. cannot hold B. to the bargain. There is ample authority for that statement and, indeed, I doubt myself whether any authority is necessary, it being, it seems to me, so obviously consistent with the plainest principles of equity.”

10 See ibid., pp. 581-583 per Lord Wright M.R.

11 Ibid., p. 584 per Lord Wright M.R.

12 Ibid., p. 585.

13 Ibid., p. 584.

14 Hudson, A.H., “Making Misrepresentations” (1969) 85 L.Q.R. 524, 525 (citations omitted)Google Scholar.

15 Joel v. Law Union Assurance Co. Ltd. [1908] 2 K.B. 836, 884 per Fletcher Moulton L.J.

16 A recent case in point is Macquarie Generation v. Peabody Resources Ltd. [2000] N.S.W.C.A. 361 (14 December 2000) where, after expounding the line of authorities that emphasises the basis of the defendant’s liability as resting on a failure to disclose changed circumstances, Beazley J.A., at para. 87, said: “This principle can be viewed in another way. The representation must be true when acted upon. … Accordingly, even if there is no duty of disclosure but information has been volunteered which is material and which subsequently becomes false, the representor must correct the information or take the consequences …”. His Honour cites Sibley v. Grosvenor (1916) 21 C.L.R. 469, 473 per Griffith C.J. (Gavan Duffy and Rich JJ. concurring) in support of this point, although Griffith C.J.’s words seem to have been taken quite out of context (they in fact related to an argument made against the materiality of the representations in that case, and Sibley v. Grosvenor did not involve supervening falsification at all).

17 Hudson, A.H., “Making Misrepresentations” (1969) 85 L.Q.R. 524, 525Google Scholar.

18 Lord Goff of Chieveley and G. Jones, The Law of Restitution (6th ed., 2002), p. 254.

19 M. Furmston (ed.), The Law of Contract, p. 571.

20 [1936] 1 Ch. 575, 582, quoting Fry J. in Davies v. London and Provincial Marine Insurance Co. (1878) 8 Ch.D. 469, 475.

21 Ibid., p. 583, quoting Turner L.J. in Traill v. Baring (1864) 4 De G.J. & S. 318, 329; 46 E.R. 941, 946 (a passage itself cited with approval by L.J., Fry in In re Scottish Petroleum Co. (1883) 23Google Scholar Ch.D. 413).

22 I shall refrain from exploring in detail the level of knowledge required in this context. Suffice it to say that the representor’s obligation to disclose will certainly turn on “knowledge”, though it may in some circumstances turn merely on “notice” (which ought to suffice to support a judgment of purely “innocent” misrepresentation in this context). What is obvious, at least, is that D must disclose all subsequent falsifications that he would have known had he not “willfully or recklessly shut his eyes” to them (cf., e.g., Blackburn, Low & Co. v. Vigors (1887) L.R. 12 App. Cas. 531; Economides v. Commercial Assurance Co. plc [1998] Q.B. 587, 602 per Simon Brown L.J.; Lockhart v. Osman [1981] V.R. 57, 69-70 per King J.). I am inclined also to think that D should ordinarily be treated as under a legal duty to disclose subsequently falsified facts that he “ought” as an honest and reasonable person to have known, even if D himself was not actually aware of any evidence from which he would have discovered or inferred the changed facts. This is notwithstanding the fact that no “special relationship” might have existed between the parties within the Hedley Byrne principle, since we are only asking here whether D should be treated as a “misrepresentor” for contract law’s purposes, and not whether he should be treated as a “negligent misrepresentor” qua recognition of tort liability. Perhaps there is merit here in adopting the formula enshrined in the American Law Institute’s Restatements—that of “reason to know”. (See Restatement (Second) of Contracts, §§19, 153(b); Restatement (Second) of Agency, §9; Restatement (Second) of Torts, §12; cf. also the Uniform Commercial Code, §1-201(25).) Such a formulation recognises an objective test based on the subjective circumstances of a person’s abilities: “A person has reason to know a fact, present or future, if he has information from which a person of ordinary intelligence would infer that the fact in question does or will exist. A person of superior intelligence has reason to know a fact if he has information from which a person of his intelligence would draw the inference. There is also reason to know if the inference would be that there is such a substantial chance of the existence of the fact that, if exercising reasonable care with reference to the matter in question, the person would predicate his action upon the assumption of its possible existence”; see Restatement (Second) of Contracts, §19, Comment (b). As the American Law Institute makes clear in its commentary accompanying the Restatements, “reason to know” extends to incorporate the notion of one’s having a “duty” to ascertain facts. The “reason to know” standard must thus be distinguished from “knowledge” (meaning a “conscious belief in the truth of a fact”, which is actual or subjective knowledge), since reason to know need not be conscious. The inference that arises from a person having reason to know, moreover, need not be that the crucial fact exists (here, the subsequently falsified fact needing to be disclosed). It is enough that the likelihood of its existence is so great that a person of ordinary intelligence (or one of superior intelligence, as the case may be) would, if acting honestly and prudently in the circumstances, act as though the fact existed until he or she could verify its existence or non-existence (e.g., by withdrawing his or her original statement, or warning P of the possibility of subsequent falsification); cf. Restatement (Second) of Contracts, §19, Comment (b).

23 Joel v. Law Union Assurance Co. Ltd. [1908] 2 K.B. 836, 884 per Fletcher Moulton L.J.; Dell v. Beasley [1959] N.Z.L.R. 89, 95 per J., McCarthy, citing Halsbury’s Laws of England (2nd ed.), vol. 23 at p. 35Google Scholar.

24 See e.g., Spencer Bower, G., Turner, A.K., and Sutton, R.J., The Law Relating to Actionable Non-Disclosure and Other Breaches of Duty in Relations of Confidence, Influence, and Advantage (2nd ed., London 1990), p. 213Google Scholar (“if and when [the representor] acquires knowledge of the supervening facts”); A.G. Guest, et. al. (eds.), Chitty on Contracts (28th ed., London 1999), p. 345 (speaking of a true statement “subsequently ceasing to be true to the knowledge of the representor before the contract is entered into” (emphasis supplied)); Restatement (Second) of Contracts, §161 (“When Non-Disclosure Is Equivalent to an Assertion”), Comment (c). (All categories under §161 presuppose knowledge of the non-disclosed fact: “A person’s non-disclosure of a fact known to him is equivalent to an assertion that the fact does not exist in the following cases only: … “(a) where he knows that disclosure of the fact is necessary to prevent some previous assertion from being a misrepresentation or from being fraudulent or material” (emphasis supplied)); R.A. Lord (ed.), Williston on Contracts (4th ed., Rochester N.Y. 1990), §69:22.

25 Indeed, treatise writers typically deal with the topic of supervening falsification under the rubric of the phenomena of “non-disclosure” and liability for “positive misrepresentation”.

26 Cf. Halsbury’s Laws of England (4th ed), vol. 31 at para. 748.

27 Keeton, W.P., “Fraud—Concealment and Non-Disclosure” (1936) 15 Texas L. Rev. 1, 6Google Scholar (emphasis mine).

28 Keeton cites two U.S. cases, McGinn v. McGinn, 50 R.I. 278, 146 Atl. 626 (1929) and Fruit Dispatch Co. v. Wolman, 124 Me. 355, 128 Atl. 740 (1925), as well as the first Restatement of Torts, 1934, §321. See Keeton, ibid., p. 6 at nn. 14 and 15.

29 Keeton, ibid., p. 6. In a footnote (ibid., n. 15), Keeton draws an illustration from golf: D tees off toward a putting green when no one is on or near the putting green. While the ball is continuing in flight, P, another player, without warning appears from a bunker directly in the line of D’s shot. D is under a duty to shout a warning to P.

30 Keeton, ibid.

31 See, e.g., the authorities cited in Spencer Bower, Turner, and Sutton, Law Relating to Actionable Non-Disclosure, pp. 214-215 at n. 2; and also Jones v. Dumbrell [1981] V.R. 199, 203-204 per Smith J., relying on Robertson and Moffatt v. Belson [1905] V.L.R. 555 (even though the representation “is true when made, but becomes false to the knowledge of the representor before the contract is concluded, and he thereafter, with that knowledge, by his conduct continues the representation, in fact and not merely constructively, then the essential element of intention to defraud is present and his liability in deceit is the same as if the representation had been false to his knowledge when originally made”). Some courts, it should be noted, have categorically held to the contrary, namely, that failure to disclose a supervening change of facts will not be fraudulent, because the representor will not be dishonest; see, in particular, Thomas Witter Ltd. v. T.B.P. Industries Ltd. [1994] Tr.L.R. 145, rightly criticised in this connection by H. Beale, “Points on Misrepresentation” (1995) 111 L.Q.R. 385, esp. at pp. 385-386.

32 See e.g., Spencer Bower, Turner, and Sutton, The Law Relating to Actionable Non-Disclosure, para. 12.09; Spencer Bower, G. and Turner, A.K., The Law of Actionable Misrepresentation (3rd ed., London 1974), pp. 121–122Google Scholar; cf. Spencer Bower, G., Turner, A.K., and Handley, K.R., Actionable Misrepresentation (4th ed., London 2000), pp. 62–63Google Scholar; Carter, J.W. and Harland, D.J., Contract Law in Australia (4th ed., Sydney 2002)Google Scholar, para. 1017 (“Knowledge by [the time of contract formation] of the true facts makes the representation fraudulent”); F. Dawson and D.W. McLauchlan, The Contractual Remedies Act 1979 (Auckland 1981), p. 23 (“If the representor is unaware of the changed circumstances, there is still a misrepresentation, albeit innocent. If he is aware, it is a case of fraudulent misrepresentation.”).

33 [1936] 1 Ch. 575, 584 per Lord Wright M.R. cf. also the Restatement (Second) of Contracts, §161, Comment (b) (“The notion of disclosure necessarily implies that the fact in question is known to the person expected to disclose it. But the failure to disclose the fact may be unintentional, as when one forgets to disclose a known fact, and it is then equivalent to an innocent misrepresentation.”).

34 There are further alternatives. The representor, when he came under the duty, may have honestly (but mistakenly) believed that the representee had also become aware of the change, or the representor may have forgotten the representation originally made by him; cf. Jones v. Dumbrell [1981] V.R. 199, 203 per Smith J.

35 Cf. Cartwright, J., Misrepresentation (London 2002), p. 70Google Scholar. See also ibid., p. 111 (“the representee will have to show not only that the representor knew of the relevant change (he has discovered the change in the facts, or he has discovered that he has already made a false statement), but also that his knowledge is sufficient to make him fraudulent: he must realize the significance of the change for the statement he has already made”). Thus, D must in this context act in some sense deliberately in suppressing the subsequently discovered truth with the aim of misleading P.

36 Although in legal analysis each legal category tends to be treated apart from the other (which at least aids exposition of the specific application criteria pertaining to the various permutations and manifestations of mistake), this should not be permitted to “mask the fact that misrepresentation is really a sub-category of mistake: induced mistake”: Cartwright, ibid., p. 2.

37 Generally, see Simester, A.P., “Agency” (1996) 15 Law and Philosophy 159Google Scholar (analysing the factual/normative distinction between human “action” and mere “events”).

38 For a lucid discussion of the concept of “agency-responsibility” generally, see Evans, J., “Choice and Responsibility” (2002) 27 Australian Journal of Legal Philosophy 97Google Scholar, though especially at pp. 99-101. See also Simester, ibid., pp. 177-181 especially.

39 See ss. 2(1) and 2(2) of the Act. Emphasis mine.

40 I do not want to suggest here that the point is merely a verbal one, or that D’s liability under s. 2 turns on some narrow issue of interpreting the statutory language employed in s. 2. On the contrary, I believe that the language of s. 2 reflects precisely what it means, in agencyresponsibility terms, for D to be denominated a “misrepresentor” (as opposed to being someone who simply benefits from, say, a common mistake). My argument is that there can be no “misrepresentation made” if the facts stated were initially true and D, acting honestly and reasonably, never learns to the contrary before P concluded the contract on the strength of D’s original statement. Although representations might be “made” down to the time when they are acted upon, misrepresentations are not “made” (at least by D) unless and until the supervening falsity is sufficiently connected to choices that D made or was capable of making at the time when P altered her position on the faith of D’s original representation. Otherwise, we are merely in the realm of contractual mistake, and P’s claim should fall for resolution under the law relating to contractual mistake rather than actionable misrepresentation.

41 Burrows, J.F., Finn, J., and Todd, S.M.D., Law of Contract in New Zealand (2nd ed., Wellington 2002), p. 333Google Scholar.

42 Dawson and McLauchlan, The Contractual Remedies Act 1979, p. 23. cf. Carter and Harland, Contract Law in Australia, para. 1017 (“Where … subsequent falsifying circumstances arise unbeknown to the representor, a misrepresentation is still taken to have been made at the time of contracting, but it is an innocent misrepresentation.”).

43 Dawson and McLauchlan, ibid., p. 23.

44 (2002).

45 Ibid., p. 70.

46 The only salient questions on this approach, therefore, are: (a) did the (mis)representation have continuing operation after it was made; and (b) if so, had it ceased to have continuing operation by the time the (mis)representee materially altered his or her position on the faith of it?

47 [1936] 1 Ch. 575, 584.

48 (1859) 7 H.L.C. 750; 11 E.R. 299.

49 Ibid., p. 769; p. 307.

50 Cf. Jones v. Dumbrell [1981] V.R. 199, 203 per Smith J. The continuing nature of certain representations is also recognised in the language of s.2(1) of the Misrepresentation Act 1967 itself, which, in relation to the statutory defence to a misrepresentor’s liability in damages for non-fraudulent misrepresentation, states: “unless he [the misrepresentor] proves that he had reasonable ground to believe and did believe up to the time the contract was made that the facts represented were true” (emphasis mine).

51 Cf. Macquarie Generation v. Peabody Resources Ltd. [2000] N.S.W.C.A. 361 (14 December 2000), para. 15 (“the representor’s duty to correct a representation that is subsequently falsified depends on the continuing operation of the representation”) and para. 20 (“any duty to correct a representation that was true when made but which later became false in fact is dependent upon the currency of that representation. A correction will no longer be relevant where a representation has lapsed”) per Mason P.

52 Cf. Briess v. Woolley [1954] A.C. 333, 353-354 per Lord Tucker.

53 [1936] 1 Ch. 575, 584.

54 (1880) 5 App. Cas. 925, 950, cited in With [1936] 1 Ch. 575, 584 per Lord Wright M.R. (emphasis mine).

55 See supra n 2.

56 [1936] 1 Ch. 575, 584.

57 See e.g., Briess v. Woolley [1954] A.C. 333, 353 per Lord Tucker; Spencer Bower and Turner, Law of Actionable Misrepresentation, para. 75, citing as an example Ship v. Crosskill (1870) L.R. 10 Eq. 73, 85 and 86 per Romilly M.R. See also Johnson v. Seymour 44 N.W. 344 (1890); and cf. the Restatement (Second) of Contracts, §165.

58 Both of these statements are quoted from Spencer Bower and Turner, Law of Actionable Misrepresentation, para. 73. (They are repeated in Spencer Bower, Turner, and Handley, Actionable Misrepresentation (4th ed.), paras. 74 and 75.)

59 3rd ed., 1974.

60 Most notably they received the express approval of Lord Tucker in Briess v. Woolley [1954] A.C. 333, 353-354 (see also ibid., p. 344 per Lord Oaksey), quoting from the second edition of Spencer Bower’s work.

61 See e.g. Halsbury’s Laws of England (4th ed.), vol. 31 at para. 754.

62 Most notably, Smith v. Kay (1859) 7 H.L.C. 750; 11 E.R. 299, cited by Spencer Bower and Turner, The Law of Actionable Misrepresentation (3rd ed.), p. 85 at n. 1, concerned the issue of whether fraudulent statements made to induce the acceptance of certain bills continued to induce the representee in respect of the execution of a bond that was later substituted for the bills.

63 Spencer Bower and Turner, ibid., p. 85 at n. 5. cf. also Spencer Bower, Turner, and Handley, Actionable Misrepresentation (4th ed.), p. 40 at n. 26.

64 [1936] 1 Ch. 575, 584. To be sure, this way of expressing the law in this area—i.e., of not leaving the other party under an error—is more consonant with the duty-to-communicate approach above, which incorporates the notion of the continuing representation, than with the strong version of the continuing representation theory apparently advocated by the authors (among others). Further contradiction features later in the text (Spencer Bower and Turner (3rd ed.), ibid., para. 74), where the authors summarise their earlier account of supervening falsification thus: “It has already been seen that this duty [to speak] arises in the case of a continuing representation where, before it is acted upon, facts come to the notice of the representor falsifying a statement which when made was true (ibid., p. 100, emphasis supplied). cf. also, to the same effect, Spencer Bower, Turner, and Handley, ibid., para. 89.

65 Spencer Bower, G., Turner, A.K., and Sutton, R.J., The Law Relating to Actionable NonDisclosure and Other Breaches of Duty in Relations of Confidence, Influence, and Advantage (2nd ed., London 1990)Google Scholar.

66 Ibid., p. 213 (first emphasis in the original, second emphasis mine).

67 [2000] N.S.W.C.A. 361 (14 December 2000, Mason P., Beazley and Giles JJ.A.).

68 Ibid., para. 3. In Jones v. Dumbrell [1981] V.R. 199, Smith J. (at p. 203) opined that the rule that representations prima facie continue up till the moment the contract is completed “merely lays down a presumption of fact, justified by ordinary human experience, leaving the matter to the court for determination as a question of fact on the whole of the evidence”.

69 Ibid., para. 8.

70 Ibid., para. 17, citing American Jurisprudence (2d), “Fraud and Deceit”, §242.

71 Ibid., para. 21.

72 It is easy to see how initially false statements might continually renew, or be made and repeated, from moment to moment down to some relevant future time, as in Meluish v. Milton (1976) 3 Ch.D. 27.

73 See e.g., Ware v. Johnson [1984] 2 N.Z.L.R. 518, 537 per Pritchard J. (statement that kiwifruit vines would produce a crop at a certain date in the future held to constitute a positive representation as to the current condition of the vines, that is, that they were presently of such a quality that they would produce a crop at the future date stated); D.I. & L. Paterson Ltd. v. Lane Group Ltd. (1998) 8 T.C.L.R. 453, 463 per Young J. (representations containing an element of forecast carry “the implied assertion that there is nothing known to the maker of the statement which indicates that the present state of affairs will not continue”).

74 See e.g., Beattie v. Lord Ebury (1872) 7 Ch. App. 777, 804 per Mellish L.J.; Maddison v. Alderson (1883) L.R. 8 App. Cas. 467. See, too, Des Forges v. Wright [1996] 2 N.Z.L.R. 758, decided under section 9 of the Fair Trading Act 1986 (N.Z.), proscribing misleading or deceptive conduct in trade (“Section 9 is not to be turned into a general warranty by a vendor of the expectations of the purchaser” (ibid., p. 764); “The Fair Trading Act is not designed to provide a guarantee to purchasers who fail to look after their own interests in a manner which is reasonable in the circumstances” (ibid., p. 765)). For an argument that Des Forges v. Wright is a sensible decision that should be followed in Australia in appropriate circumstances, see W. Pengilley, “Section 52: Can the Blind Mislead the Blind?” (1997) 5 T.P.L.J. 4.

75 If the innocent misrepresentation is promissory in form, then it is usually readily capable of being governed by contract law.

76 Cf. the interesting remarks of Judge Swan in Monier v. Guaranty Trust Co., 82 F. 2d. 252, 245 (2nd cir., 1936), quoted at length by Mason P. in Macquarie Generation v. Peabody Resources Ltd. [2000] N.S.W.C.A. 361 (14 December 2000), para. 18. It has been said judicially that by the representor’s conduct of continuing negotiations and concluding the contract, the representee will ordinarily understand the representor to be asserting, throughout, that the facts initially represented had remain unchanged (see Jones v. Dumbrell [1981] V.R. 199, 203 per Smith J.), but this just begs the question as to whether the representee should be entitled, on ordinary legal principles, to entertain this particular understanding, in contrast, say, to the weaker form of comprehension that the facts initially represented had remain unchanged to the representor’s knowledge.

77 My use of a motor vehicle example in the text above brings to mind an alternative argument that might on occasion be open to a party wishing to avoid the consequences of an unknown change of facts during the interim between a contractual offer being made and its being accepted by the offeree. This is to rely on the possible existence of an implied condition in the offer that, until the moment of acceptance, the subject matter of the proposed transaction has remained in substantially the same state as at the time of the offer. If the implied condition is broken before the offeree purports to accept the offer (the subject matter having become seriously damaged, for example), the offer will have ceased to be capable of acceptance and no contract will have been concluded. Such an argument was successful in Financings Ltd. v. Stimson [1962] 1 W.L.R. 1184 (C.A.).

78 See e.g., Traill v. Baring (1864) 4 De G.J. & S. 318; 46 E.R. 941; DPP v. Ray [1974] A.C. 370; and Jones v. Dumbrell [1981] V.R. 199. There is controversy in England as to whether the principle in With v. O’Flanagan applies to changed represented intentions pre-contract; see Wales v. Wadham [1977] 1 W.L.R. 199 (apparently receiving the approval of the House of Lords on this point in Livesey v. Jenkins [1985] A.C. 424, 439), but this case has generally been well criticised on the ground that Tudor Evans J. failed to correctly apply the principles associated with Edgington v. Fitzmaurice (1885) L.R. 29 Ch.D. 459 and With v. O’Flanagan. Given that a person’s represented intention is as much a fact as the state of his or her digestion, there is no reason why the ordinary principles surrounding supervening falsification should not also apply, mutatis mutandis, to altered represented intentions, as in Traill v. Baring, DPP v. Ray, and Jones v. Dumbrell, among other cases.

79 With v. O’Flanagan.

80 I do not deny that, after making a statement, D might, in virtue of his special knowledge or access to the facts relating to the subject matter of the proposed transaction or his representation, be under a responsibility to monitor the continued accuracy of the state of affairs represented, and that he may be adjudged careless or reckless for failing to discover a supervening falsification of which he in fact is subjectively unaware. But these sorts of cases are likely to support a judgment that D either had inferred actual knowledge, or at least (in the case of neglect) reason to know, of the changed circumstances, hence that he came under a duty to disclose or warn, failure to discharge which duty amounted to misrepresentation accordingly. See also the discussion supra n. 22. In Lockhart v. Osman [1981] V.R. 57, for example, the health of cattle offered for sale altered after a statement was made that the cattle were “suitable for breeding”; the Court held that the agent’s failure to determine whether the cattle were infected was at least reckless, and so failure to warn the intending buyers amounted to a fraudulent misrepresentation.

81 Cf. Watt v. Southern Cross Assurance Co. Ltd. [1927] N.Z.L.R. 106, 111 per Adams J. (would- be insured’s disclosure obligation continues down to the moment of formation of an insurance contract).

82 Obviously, although D must know of the changed circumstances in order to have come under the duty, he need not know that he has come under a duty in order to come under the duty, nor in order to breach it.

83 Macquarie Generation v. Peabody Resources Ltd. [2000] N.S.WC.A. 361 (14 December 2000), para. 15 per Mason P. (emphasis mine). See also ibid., paras. 6, 7, 11, and 23 per Mason P., and paras. 84-86 per Beazley J.A. (although apparently to the contrary ibid., para. 87). See also Kitto v. Lyric Nominees Pty Ltd. [1998] Q.C.A. 370 (17 November 1998), para. 28 per McMurdo P., Thomas J.A., and Moynihan J. (“Of course statements of a present state of affairs may well be capable of being taken as a representation that that situation will continue indefinitely and that the representee will be advised if there is a change.” (emphasis mine)).

84 See text supra n. 42.

85 See, in particular, Cartwright, Misrepresentation, Chap. 3 at para. 3.26. The arguments are in essence repeated from J. Cartwright, Unequal Bargaining: A Study of Vitiating Factors in the Formation of Contracts (Oxford 1991), pp. 84-86.

86 Cartwright, Unequal Bargaining, ibid., p. 85.

87 J. Cartwright, Misrepresentation, p. 69.

88 Ibid., p. 70.

89 Including Smith v. Kay (1859) 7 H.L.C. 750; 11 E.R. 299; Briess v. Woolley [1954] A.C. 333; and Meluish v. Milton (1976) 3 Ch.D. 27. The exceptions are the cases involving changed intention, such as DPP v. Ray [1974] A.C. 370 and Jones v. Dumbrell [1981] V.R. 199—cases that will ex necessitate involve known, rather than unknown, supervening falsification.

90 At common law (including equity), the basis for relief for all causative pre-contractual misrepresentations was the effect that D’s misleading or deceptive conduct had on P’s decisions and actions in contracting: Did D’s conduct lead P into error, causing her to conclude a contract that she would (or might) not have entered into had she known the truth? cf. Greig, D.W. and Davis, J.L.R., The Law of Contract (North Ryde 1987), p. 827Google Scholar.

92 Spencer Bower and Turner, The Law of Actionable Misrepresentation (3rd ed.), p. 85 (emphasis added). cf. Spencer Bower, Turner, and Handley, Actionable Misrepresentation (4th ed.), p. 40 (para. 76).

93 J. Cartwright, Misrepresentation, para. 1.02 (“In a claim of misrepresentation the claimant asserts that the defendant communicated to him inaccurate information on which he relied; that is, by his statement the defendant caused [the claimant] to make a mistake” (ibid., p. 2)).

94 In an earlier work, Cartwright states that “given the clear policy of the law of rescission in favor of the representee, it seems that the better view is indeed to impose upon the representor a continuing responsibility for the truth of his statement—even if he does not know of the changed circumstances which render the statement false”; see Cartwright, Unequal Bargaining, p. 86. But this, too, merely begs the question at hand. At common law, there was clearly a policy in the law of rescission in favor of the misrepresentee, hence against the misrepresentor, but Cartwright never addresses the question of what it means, in agencyresponsibility terms, to be a misrepresentor (as opposed to simply being a party to, or a victim of, a causative pre-contractual mistake).

95 I should make it clear that although the concept of misrepresentation presupposes agencyresponsibility in relation to the risk that D, when he spoke, might have been mistaken, D’s failure to respond through choice (or the capacity to choose) to that risk need not imply that D’s misrepresentation amounted to legal negligence if the risk materialised. D is liable absolutely for purely innocent misrepresentation regardless of whether the risk of his being mistaken about the facts was a reasonable or an unreasonable one. Legal negligence, of course, implies that D failed to respond in an agency-responsible manner to an unreasonable risk of a foreseeable outcome (here that the facts he conveyed to induce P’s jural act were erroneous). At least from the standpoint of justifying rescission of a contract, if not damages under s. 2 of the Misrepresentation Act, D will thus still be liable for innocent misrepresentation regardless of whether he had reasonable grounds for his continuing belief or not.

96 See e.g., Misrepresentation Act 1967, s. 2(1); Misrepresentation Act 1971 (S.A.), s. 7(2); Law Reform (Misrepresentation) Act 1977 (A.C.T.), s. 4(2).

97 Cartwright, Misrepresentation, p. 70.

98 As in Kitto v. Lyric Nominees Pty Ltd. [1998] Q.C.A. 370 (17 November 1998) and Macquarie Generation v. Peabody Resources Ltd. [2000] N.S.W.C.A. 361 (14 December 2000).