In Malaysia, misrepresentation is confined to innocent misrepresentation under Section 18(a) and (c) of the CA, which is “an untrue statement that the speaker believes is accurate”. Section 18(b) of the CA covers negligent misrepresentation for statements made in breach of duty, as seen in Kluang Wood Products Sdn Bhd & Anor v Hong Leong Finance Bhd & Anor. In U.K., an innocent misrepresentation as such has conventionally been defined as “a false statement of material fact that at least in part induces entry into a contract with the maker of the statement” in Whittington v Seale-Hayne. In Nocton v Lord Ashburton, an action for negligent misrepresentation was allowed if parties were in a fiduciary relationship.
Under Section 2(1) Misrepresentation Act 1967, a negligent misrepresentation is “a statement made without reasonable grounds for belief in its truth”. In the U.S., the Restatement (Second) of Torts uses a comparable description, although not identical, when speaking of a misrepresentation of “a material fact for the purpose of inducing the other party to act or to refrain from acting in reliance upon it”. In a misrepresentation case, the defendant was either unaware that the material fact was false (innocent misrepresentation), or the defendant did not bother to find out whether the fact was false or true (negligent misrepresentation). All the 3 countries have similar types of misrepresentation, which is innocent misrepresentation and negligent misrepresentation, other than fraudulent misrepresentation. Thus, the concepts of negligent misrepresentation based on the above 3 countries share the requirement of a lack of reasonable care (which is negligence) on the side of the maker of the statement.
Although English law fails to mention this requirement directly, Section 2(1) of the Misrepresentation Act of 1967 rather focuses on misrepresenting a person’s belief in the truth of the statement.2.2 ApplicationIn Malaysia, Abdul Wahab J provides the requirements of misrepresentation in Chuah Tong Yeong v Kuala Lumpur Golf & Country Club as follows: (1) a representation, (2) the claimant was induced by that representation, (3) the representation is untrue, and (4) it is a suitable case for rescission. Silence in certain situations, similar to the case of fraud, may amount to a negligent misrepresentation under Section 18(b) Contracts Act 1950 where there is an obligation imposed to disclose as seen in Double Acres Sdn Bhd v Tiarasetia Sdn Bhd.
In U.K., certain criteria must be satisfied in order to amount to an actionable misrepresentation in which (1) a false statement was made and (2) that it induced the contract. The application of misrepresentation can be seen in Salt v Stratstone. In this case, Mr. Salt was contacted by an employee of Stratstone Ltd, offering to sell him a Cadillac described as “brand new”.
Relying on this information, Mr Salt bought the car and find that the vehicle was several years old but unregistered, besides had been subjected to several repairs. After the car broke down leaving him stranded, Mr. Salt brought an action against Stratstone Ltd. As shown above, the misrepresentation was that it was described as “brand new” but in fact, the vehicle was several years old and was of extensive damage and repairs prior to its registration, makes him suffered loss.
Besides, silence will not generally amount to a misrepresentation, unless it is a contract of uberrimae fidei, which is one of utmost good faith where the representor is in a fiduciary position, or in an insurance contract. A duty exists in such contracts to disclose all material facts and a failure to do so may give rise to an action for misrepresentation, this can be seen in HIH Casualty and General Insurance Ltd v Chase Manhattan Bank.