However, Justice Teare considered that in cases of fraudulent misrepresentation, the test should be precise, “but the party could have acted differently”. This is a break with previous case law. Applying this more comprehensive test, Teare J. concluded that the misrepresentation led Rembrandt to sign the second contract, although it was influenced by several factors. One of the remedies available to the court in the event of fraudulent misrepresentation is to cancel the contract caused by the fraudulent misrepresentation. However, this will normally only be possible if it is possible to restore the parties to the situation in which they found themselves before the conclusion of the contract. In higher-stakes situations, a false statement may be considered an event of default by the lender, such as in a loan agreement. Meanwhile, misrepresentation may be a reason to terminate a merger and acquisition (M&A) transaction, in which case significant pause fees may apply. The third type is fraudulent misrepresentation. A fraudulent misrepresentation is a statement that the defendant made knowing that it was false, or that the defendant made recklessly in order to induce the other party to enter into a contract. The aggrieved party may request the cancellation of the contract and claim damages from the defendant. In some situations, such as a fiduciary relationship, a misrepresentation may occur by omission.
That is, false statements can occur if a trustee fails to disclose material facts of which he or she is aware. In Doumouras v. Chander, 2019 ONSC 6056, the Court described the five requirements for a claim for negligent misrepresentation: There are three types of misrepresentation. An innocent misrepresentation is a false statement of material facts by the defendant who did not know at the time of signing the contract that the statement was false. The remedy in this situation is usually termination or cancellation of the contract. In fact, the court upheld Rembrandt`s defense for fraudulent misrepresentation and quashed the second treaty. Further details on the main legal issues raised by the judgment are set out below. This judgment makes it clear that the English courts will not easily allow a party to profit from fraudulent misrepresentation.
However, given the factual and legal specifics of the case, it is possible that either party may appeal the judgment. A misrepresentation is a false statement of a material fact by one party that influences the decision of the other party when entering into a contract. If the misrepresentation is discovered, the contract may be declared null and void and, depending on the situation, the injured party may claim damages. In such a contractual dispute, the party who made the misrepresentation becomes the defendant and the aggrieved party is the plaintiff. There is also an obligation to correct factual allegations that are later found to be false. In this case, failure to correct a previous misrepresentation would constitute misrepresentation. The second type is negligent misrepresentation. This type of misrepresentation is a statement that the defendant did not attempt to verify before performing a contract. This is a violation of the concept of “due diligence” that a party must apply before entering into an agreement. The remedy for negligent misrepresentation is termination of the contract and, if necessary, damages. In order to prove an allegation in a misrepresentation, a plaintiff must prove that the defendant made a false statement of fact that led him to enter into a contract, causing prejudice to the plaintiff.
An allegation of fraudulent deception naturally has the added advantage of circumventing the usual removal rules and allowing claimants to compensate for losses resulting from the inducement, not just those that are reasonably foreseeable. Therefore, the Court`s judgment in the present case has undoubtedly made that remedy an even more attractive alternative than before to negligent misrepresentation and breach of duty. The High Court`s decision in BV Nederlandse Industrie Van Eiprodukte v Rembrandt Enterprises, Inc [2018] EWHC 1857 (Comm) prescribes a new, more comprehensive test for incentives in cases of fraudulent misrepresentation. This more comprehensive test can help applicants prove fraudulent misrepresentation. In the meantime, the test for inducing fraudulent misrepresentation is broader (i.e., weaker) than the previous “but for” test, and while practitioners must be aware of their obligation to the court not to invoke fraud without proper merit, it may now be easier for claimants to prove that this misrepresentation led them to enter into a contract. The established test for inducement to misrepresent is as follows: “Without the misrepresentation, the party would not have concluded the contract on the terms on which it did so. This document provides a general summary and is provided for informational/educational purposes only. It does not purport to be exhaustive and does not constitute legal advice.
Specific legal advice should always be sought before taking or refraining from taking any action. The question before the court was whether this fraudulent misrepresentation had led Rembrandt to conclude the second treaty. It was found that Rembrandt had three reasons for accepting the price increase: (1) it wanted to quickly secure the product in the face of market bottlenecks; (2) the price increase remained profitable; and (3) it had no reason to believe that the fees submitted by NIVE were incorrect. The case concerned a contract under which the plaintiff (“NIVE”) supplied the defendant (“Rembrandt”) with egg products. The initial contract was concluded in May 2015. The parties subsequently entered into a second contract (the “Second Contract”) in June 2015 with an increased price reflecting the costs incurred by NIVE to meet additional regulatory burden. The second contract took over the obligations of the original contract (with the exception of the price increase) and terminated the original contract. Since the egg products supplied by NIVE under the second contract were resold by Rembrandt, it is impossible to reduce the parties to their pre-contractual positions. However, the court held that the second contract could and should be cancelled: there was no obstacle to withdrawal, since Rembrandt could make a refund in the form of the monetary value of the delivered goods.