# Misrepresentation: actionable false statements inducing a contract

> **Key takeaway:** False statement of fact inducing contract. Types: fraud (Derry v Peek), common-law negligence, MA 1967 s.2(1) (reverse burden). Remedies: rescission (bars apply) + damages (s.2(1) measure often treated as fraud-like — Royscot). s.2(2) damages in lieu of rescission for non-fraudulent cases.

- **Jurisdiction:** England & Wales
- **Practice area:** Commercial
- **Last reviewed:** 2026-08-04
- **Interactive page:** https://kttclegal.info/library/notes/Commercial/misrepresentation
- **Keywords:** misrepresentation, Misrepresentation Act 1967, Derry v Peek, rescission, section 2(1), Royscot, inducement, deceit

## What is this about?

Misrepresentation provides remedies where a party is induced to contract by a false statement of fact (or, in limited circumstances, law) that is not incorporated as a contractual term — or that is pursued in parallel with contractual claims. The Misrepresentation Act 1967 reshaped the damages landscape, particularly for non-fraudulent misrepresentation under section 2(1).

## What is the core rule?

An actionable misrepresentation is a false statement of existing fact (or, where the modern authorities allow, law) made by or on behalf of one contracting party to the other, which induces the representee to enter the contract. Remedies and the burden of proof differ by type: fraudulent (Derry v Peek), negligent/common-law, and statutory under Misrepresentation Act 1967 s.2(1) (where the representor must prove reasonable grounds for belief). Rescission is the primary response, subject to bars; damages may be available in deceit, under s.2(1), or under s.2(2) in lieu of rescission for non-fraudulent cases.

## What are the elements or test?

1. Was there a representation (statement or conduct amounting to a representation), not mere sales puff or a pure statement of future intention without present fact?
2. Was the representation false at the time it was made (or became false before contract without correction where a duty to update arises)?
3. Did it induce the representee to enter the contract (need not be the sole cause; materiality and actual inducement are the practical focus)?
4. Classify the type: fraudulent (knowledge of falsity / absence of belief in truth / recklessness as to truth — Derry v Peek), negligent at common law, or within MA 1967 s.2(1)?
5. Are rescission bars engaged (affirmation, lapse of time, impossibility of restitution, third-party rights)? Are damages available and on what measure?

## Which authorities matter?

- **Misrepresentation Act 1967, ss.1–2** — Preserves rescission even where the representation has become a term (s.1); s.2(1) creates a damages claim for non-fraudulent misrepresentation unless the representor proves reasonable belief; s.2(2) allows damages in lieu of rescission.
- **Derry v Peek (1889) 14 App Cas 337** — Defines fraud for the tort of deceit: false representation made knowingly, without belief in its truth, or recklessly careless whether it be true or false.
- **Howard Marine & Dredging Co Ltd v A Ogden & Sons (Excavations) Ltd [1978] QB 574** — Illustrates the practical strictness of the s.2(1) reasonable-grounds defence.
- **Royscot Trust Ltd v Rogerson [1991] 2 QB 297** — Court of Appeal held that damages under s.2(1) are assessed as if the misrepresentation had been fraudulent (fiction of fraud) — still the leading CA authority, though often criticised academically.

## How does this apply in practice?

This note is limited to pre-contractual misrepresentation inducing a contract under English law. It does not cover negligent misstatement to third parties (Hedley Byrne), pure contractual warranty claims, or consumer-specific unfair commercial practices regimes in detail. Always check whether the statement was incorporated as a term — the client may have concurrent or alternative routes.

## What are common pitfalls?

- Pleading only common-law negligence and missing the reverse burden under MA 1967 s.2(1)
- Assuming opinion can never be misrepresentation — an opinion may imply underlying facts or that it is honestly held
- Treating rescission as always available without checking the classic bars
- Conflating measure of damages for deceit / s.2(1) with ordinary contractual expectation loss

## When would a practitioner use this?

Relevant when a client seeks to unwind or claim loss from a deal induced by false statements in negotiations, information memoranda, or pre-contract correspondence.

## Quick reference

False statement of fact inducing contract. Types: fraud (Derry v Peek), common-law negligence, MA 1967 s.2(1) (reverse burden). Remedies: rescission (bars apply) + damages (s.2(1) measure often treated as fraud-like — Royscot). s.2(2) damages in lieu of rescission for non-fraudulent cases.

---

*Reference material from [KTTC Legal](https://kttclegal.info/), not legal advice. Work product supports instructing solicitors and barristers under their supervision. England & Wales.*