Liability for misrepresentations made through agents in pre-contract discussions

By Clare Kempkens

The UK Supreme Court has recently ruled in the case of Cramaso LLP (Appellant) v Ogilvie-Grant, Earl of Seafield and Others (Respondents) (Scotland) that where A (an individual) relies upon a misrepresentation made by B and later enters into a contract as agent for C (company), C will be able to rely on the misrepresentation made by B to A, if such a misrepresentation induced C to enter into a contract with B. Crucially, this will be the case even if A was not yet an agent for C at the time that the misrepresentation was actually made.

Cramaso was decided under Scots law, and as such not all of the Supreme Court’s findings are relevant within English jurisdiction. In England and Wales, under the Misrepresentation Act 1967, where a misrepresentation is made in pre-contract negotiations, then even if this misrepresentation was not fraudulent and there was no duty of care owed between the parties, providing that the misrepresentation had the effect of inducing the innocent party into the contract, not only may they elect to set aside the contract but damages may be awarded in respect of any loss. Cramaso extends this liability to any misrepresentation made to an agent for the innocent party even prior to their appointment as such. The decision in this case also clarifies that a party that makes a pre-contract misrepresentation can be held liable even when there is a significant interval of time between the making of the misstatement and the formation of the contract…

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