Misrepresentation Under Ghana’s Contract Law: Meaning, Types, and Legal Remedies

MISREPRESENTATION UNDER GHANA’S CONTRACT LAW

1. Introduction

Misrepresentation is a major doctrine affecting the validity and enforceability of contracts. It addresses situations where a party is induced to enter into a contract by a false statement made by the other party. The law intervenes to protect the integrity of consent and to prevent unfair advantage.

In Ghana, misrepresentation renders a contract voidable and not void. The aggrieved party is given the option to rescind the contract and in appropriate cases claim damages or indemnity depending on the nature of the misrepresentation.

2. Meaning and Distinction Between Misrepresentation and Mistake

Meaning of Mistake

A mistake refers to a false assumption held by one or both parties at the time of contracting. It concerns an incorrect belief about an existing fact or situation. Where a mistake is fundamental, the contract is treated as void because there is no true agreement between the parties.

Example
If both parties believe that a specific consignment of cocoa exists when in fact it has already been destroyed, the contract is void for common mistake.

Meaning of Misrepresentation

Misrepresentation is a false statement of fact made by one party to another before the contract is concluded, which induces the other party to enter into the contract.

Unlike mistake, misrepresentation involves communication between parties. One party makes a false statement and the other relies on it.

Effect
Misrepresentation makes the contract voidable and not void. The innocent party may choose to rescind the contract or affirm it.

Key Distinction

Mistake affects the existence of agreement itself and renders the contract void.
Misrepresentation affects the quality of consent and renders the contract voidable.

3. Operative Misrepresentation

Not every false statement amounts to misrepresentation in law. For a misrepresentation to be operative and legally actionable, certain requirements must be satisfied.

3.1 False Statement of Fact Made Before Contract

The statement must be false and must be made before the contract is concluded. Statements made after the contract do not amount to misrepresentation.

Illustration
If a seller falsely states that land is free from litigation before sale, the statement may be actionable. If the statement is made after the agreement, it is not misrepresentation.

3.2 Opinion or Intention as Misrepresentation

Generally, statements of opinion and intention are not actionable. However, they become misrepresentation where:

• The opinion is objectively unreasonable
• The maker possesses special knowledge or expertise
• The stated intention was never genuinely held

Bisset v Wilkinson (1927)

Facts

The seller of land in New Zealand told the buyer that if the land was properly worked, it could carry about 2,000 sheep. The land had never been used for sheep farming. The buyer knew this fact. After purchase, it became clear that the land could not sustain that number of sheep. The buyer sought to rescind the contract.

Decision

The court refused rescission.

Reasoning

The court held that:

• The seller had no special knowledge or experience in sheep farming on that land
• The buyer knew the land had never been used for sheep farming
• The statement was therefore a mere opinion and not a statement of fact

Since the buyer could independently assess the land, the statement could not be treated as misrepresentation.

Principle

A statement of opinion is not misrepresentation unless it is made in circumstances where it implies factual assurance or expert knowledge.

Esso Petroleum v Mardon

Facts

Esso provided projections about the expected output of a petrol station site to a prospective operator. The figures were presented as estimates. The operator relied on these projections and entered into the agreement. The figures later turned out to be grossly inaccurate.

Decision

The court held Esso liable.

Reasoning

The court held that:

• Esso possessed special technical knowledge and experience
• It knew the plaintiff would rely on its projections
• The estimates were made negligently and without reasonable basis

Although framed as opinion, the statement carried the authority of expert knowledge and therefore amounted to misrepresentation.

Principle

Where an expert gives an opinion intending reliance, and the opinion lacks reasonable basis, it becomes actionable misrepresentation.

3.3 Misrepresentation by Silence and Partial Disclosure

Silence does not generally amount to misrepresentation. However silence becomes actionable where:

• There is a duty to disclose
• Partial disclosure creates a false impression
• A previous true statement becomes false and is not corrected

With v O’Flanagan

Facts

A doctor told a potential buyer that his medical practice earned about £2,000 per year. This was true at the time. Before the contract was signed, the practice income fell drastically to about £5 per week. The doctor failed to disclose this change.

Decision

The court held that misrepresentation occurred.

Reasoning

The court ruled that:

• Representations are treated as continuing until contract completion
• Once the statement became false to the knowledge of the representor, there was a duty to correct it
• Silence in this context amounted to misrepresentation

Principle

Where circumstances change and render an earlier statement false, failure to disclose the change constitutes misrepresentation.

3.4 Inducement and Reliance

The misrepresentation must have induced the representee to enter into the contract. The claimant must show that the statement influenced the decision to contract.

Atwood v Small

Facts

The seller made exaggerated claims about the earning capacity of a mine. The buyer appointed independent experts to verify the claims. The experts confirmed the figures. The buyer relied on the experts and not directly on the seller’s statements. When the mine underperformed, the buyer sought rescission.

Decision

The court refused rescission.

Reasoning

The court held that:

• The buyer did not rely on the seller’s statements
• Independent verification broke the chain of inducement
• The misrepresentation therefore did not operate on the buyer’s mind

Principle

Where the representee relies on independent investigation rather than the false statement, misrepresentation is not operative.

3.5 Knowledge of Truth

If the representee knows the true facts, there can be no inducement and therefore no actionable misrepresentation.

Horsfall v Thomas

Facts

A gun manufacturer concealed a defect in a gun by inserting a metal plug. The buyer never inspected the gun before purchase. The gun later burst. The buyer sought rescission on grounds of misrepresentation by conduct.

Decision

The court rejected the claim.

Reasoning

The court held that:

• The buyer never saw the defect or the concealment
• The concealment did not influence his decision
• There was no inducement

Principle

There is no misrepresentation unless the false conduct or statement influenced the representee’s decision.

3.6 Sale of Goods Act

Section 13(1) of the Sale of Goods Act, 1962 (Act 137) provides as follows:

Section 13—Quality and Fitness of Goods.

 (1) Subject to the provisions of this Act and any other enactment there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale except as follows— 

(a) There is an implied condition that the goods are free from defects which are not declared or known to the buyer before or at the time when the contract is made: 

Provided that there is no such implied condition— 

(i) where the buyer has examined the goods, in respect of defects which should have been revealed by the examination; 

(ii) in the case of a sale by sample, in respect of defects which could have been discovered by a reasonable examination of the sample; 

(iii) where the goods are not sold by the seller in the ordinary course of his business, in respect of defects of which the seller was not, and could not reasonably have been aware. 

(b) Where the goods are of a description which are supplied by the seller in the course of his business and the buyer expressly or by implication makes known the purpose for which the goods are required there is an implied condition that the goods are reasonably fit for that purpose.

The implication of section 13(1) on inducement in Ghana is that there is an implied condition from the seller of a particular good, that the goods are free from defects that are not declared or that the buyer is unaware of at the time of entering into the contract. 

The exception to this is where the buyer examines the goods and should have discovered the defects or where the sale is by sample, had the buyer reasonably examined the sample, he would have discovered the defect. Another exception is where the seller does not sell the goods in the normal course of his business such that he could not have been reasonably aware of the defect. 

Illustrations

1. A sells a car to B. There is a general implied condition by reason of section 13(1) that the car is free from defects. 

B takes the car for a test drive and inspects it. Upon inspection, it should have become apparent to B that the alignment of the car was off. A is absolved from the implied condition because B should have detected the defect upon inspection. 

2. A sells clothes B. He sends samples of the intended clothes he intends to sell. There is a flaw in the design of the clothes which B would have seen had he reasonably inspected the samples that A delivered. 

A is therefore absolved from the implied condition under section 13(1). 

3. A sells a 3D printer to B. however, A’s usual business is the sale of flowers. The sale of the printer is not in the ordinary course of A’s business. Therefore, there is no implied condition imposed on him. 

4. A sells cars. B reaches out wanting a car for the purpose of sand bashing. There is an implied condition that the car that A supplies to B is fit for sand bashing. 

4. Kinds of Misrepresentation

There are three recognised categories:

1. Fraudulent misrepresentation
2. Negligent misrepresentation
3. Innocent misrepresentation

5. Fraudulent Misrepresentation

Definition

Fraudulent misrepresentation occurs where a false statement is made:

• Knowingly
• Without belief in its truth
• Recklessly without caring whether it is true or false

Derry v Peek

Facts

A company issued a prospectus stating that it had the right to operate trams using steam power. In fact, this right depended on approval from the Board of Trade which had not yet been granted. The directors believed approval would be automatic. Investors relied on the statement and bought shares. Approval was later refused and the company collapsed.

Decision

The court dismissed the claim.

Reasoning

The court held that:

• Fraud requires proof of dishonesty
• The directors honestly believed approval would be granted
• Mere carelessness or optimism is not fraud

Principle

Fraud requires proof of lack of honest belief in the truth of the statement.

Effect of Fraudulent Misrepresentation

The innocent party may:

• Rescind the contract
• Claim damages in tort for deceit
• Repudiate the contract where performance has not begun

Ghanaian Jurisprudence

Kwabena Yeboah v Phillip Acheampong

Facts

The defendant claimed to be in a legal small-scale mining business. The plaintiff agreed to provide financial support to the defendant in exchange for a percentage of the profits realized from the business. However, the business incurred losses. 

The plaintiff claimed, inter alia, that there was a fraudulent misrepresentation on the part of the defendant who claimed to have legal papers to carry out small scale mining when in fact, he did not. They further stated that on this basis, the plaintiff was entitled to rescind the contract and be restored to the position he was in before entering into the contract. 

Court Reasoning

The court found that there was indeed a joint venture agreement between the parties. Which agreement was supervised by the lawyer for the plaintiff. The evidence showed that counsel for the plaintiff took necessary steps to protect the interests of the plaintiff. It therefore makes no sense that the plaintiff did not take steps to examine the supposed legal documentation of the defendants to carry out legal mining. 

The court also determined that the plaintiffs would receive a lion share of the profits made from the business such that it was as though the defendant was merely working for the plaintiff. It was clear that the plaintiff stood to benefit the most from the illegal outfit. 

Holding

The plaintiffs were aware or ought to have been aware that the defendant was into illegal mining. 

5.1 Proof of Fraudulent Misrepresentation

The position in Ghana is that he who alleges, must prove. The onus therefore lies on a person claiming fraudulent misrepresentation to present evidence showing that a false statement was made upon which the person relied to their detriment. 

Caitec Motors v Top Kings

Facts 

The defendant purchased some trucks from the plaintiff and defaulted in payment for the said trucks, resulting in the current action. The defendant claimed that they relied on a misrepresentation made by the plaintiffs to their detriment. They alleged that there were latent defects in the truck of which the plaintiffs were aware at the time that they sold the trucks to the defendants. 

Court Reasoning

The court stated that the onus was on the defendants to prove that there was indeed a fraudulent misrepresentation. The mere fact that a vehicle purchased develops certain faults a few months after purchase is not by itself evidence or proof of misrepresentation as to the state of the vehicle by the time of the contract for the purchase of said vehicle. 

The defendant upon realizing the misrepresentation, was entitled to rescind the contract, but took no steps to do so until the current action instituted by the plaintiff. In fact, the defendants offered to make further payments when the plaintiffs repossessed some of the trucks. This conduct was deemed to be inconsistent with a person alleging misrepresentation. The conduct of the defendant marked a reaffirmation of the contract

Holding

The court held that the defendant failed to prove that there was a misrepresentation. 

6. Negligent Misrepresentation

Definition

Negligent misrepresentation occurs where a false statement is made carelessly in breach of a duty of care owed to the representee.

The courts imply this duty even in the absence of a fiduciary relationship. The courts will establish a special relationship requiring that care is taken in the making of a statement, such that the said statement is accurate. This duty of care is generally owed by professionals, including barristers, solicitors, surveyors etc. 

Hedley Byrne v Heller and Partners

Facts

Advertising agents requested a financial reference for Easipower Ltd through their bank. Easipower’s bankers provided a favourable report stating the company was financially sound but attached a disclaimer of responsibility. The plaintiffs relied on the reference and suffered losses when Easipower defaulted.

Decision

The claim failed because of the disclaimer.

Reasoning

The court established that:

• A duty of care may arise even without contract or fiduciary relationship, such a duty of care could be deemed to exist if there is a special relationship between the parties which demands that care is taken that the statement being made is accurate. 
• A special relationship existed requiring reasonable care
• Liability would have arisen but for the disclaimer

Principle

Negligent misrepresentation is actionable where a special relationship creates a duty of care and reliance is foreseeable.

Ghanaian Jurisprudence

Export Import Bank v Hydroform Ghana Ltd

The defendants in this case argued, inter alia, that they relied on statements made by Allfirst bank as to the reliability and professionalism of USA Fametek, in getting into a contract with them. This eventually led to their detriment. They argued that Allfirst was under a duty of care when making the said recommendation. Their conduct therefore amounted to a negligent misrepresentation. 

Court Reasoning

The court first established that the plaintiffs could not be held liable for the statements made by Allfirst. Relying on the case of Asante v Scanship  the court held that the proper parties to answer the charge for negligence were not present. 

The court then went on to determine based on the evidence, whether or not Allfirst Bank did indeed make negligent misstatements. The court found that statements made were not in the way of professional advice. The defendants were encouraged to undertake their own interests. Which they did in fact do; hiring an independent consultant who also recommended USA Fametek. It was upon this reliance that the defendants relied to enter into the contract. They could therefore not claim negligent misrepresentation against Allfirst. 

The court in coming to this decision relied on the dictum in the case of Ecobank Ghana Ltd v Aluminum Enterprise. Where the court said:

“In an action based upon negligence, the Plaintiff must plead and establish facts showing:

i.                    that the Defendant owed a duty of care to the Plaintiff;

ii.                  that the Defendant breached the duty of care; and

iii.                as a result of such breach of duty the plaintiff suffered damage.

iv.                that damage was not too remote.”

Holding

The court dismissed the claim of negligence. 

7. Innocent Misrepresentation

Definition

An innocent misrepresentation is a false statement made honestly and without negligence, which induces a party to contract.

Newbigging v Adam

Facts

The plaintiff was induced to join a partnership by a false but honest statement regarding the capacity of machinery. He invested £10,000. The business failed. He sued for rescission and indemnity.

Decision

The court granted rescission and indemnity.

Reasoning

The court held that:

• The plaintiff was entitled to be restored to his pre-contract position
• He could recover obligations imposed by the partnership agreement
• He was not entitled to damages

Principle

In innocent misrepresentation, the remedy is rescission and indemnity but not damages.

BFT Enterprise v Obantamtam

The plaintiffs entered into a leasehold agreement with the defendants. Upon registering the lease at the Lands Commission, it was discovered that there was a prior lease already subsisting on the land. The trial court rescinded the contract and held that costs incurred in the execution of the leasehold agreement be restored. 

The defendants argued on appeal that the plaintiff was not a bona fide purchaser for value, having failed to conduct a search at the Lands Commission before the execution of the agreement. 

Court Reasoning

The appellate court agreed with the trial judge that there was indeed a misrepresentation which was innocent. The defendants had assured the plaintiff that there was no encumbrance on the land and that they would have quiet and peaceful enjoyment of the land. Which assurance was stated as an implied covenant in the lease agreement. 

The issue of a bona fide purchaser for value, related largely to outright purchase of land and related to instances between a purchaser and a third party, not a purchaser and the seller. Meaning that, a seller cannot allege that the purchaser ought to have conducted a search before purchasing a property. This would be unjust. 

The court held in favor of the plaintiff. 

8. Remedies for Misrepresentation

The primary remedy is rescission. The aim is restitutio in integrum, restoring the parties to their original positions.

9. Rescission

Rescission sets aside the contract and restores the parties as far as possible to their pre-contract positions.

Car and Universal Finance Co v Caldwell

Facts

A rogue obtained a car by fraudulent misrepresentation. The owner immediately informed the police and the Automobile Association. The rogue sold the car to a third party.

Decision

The court held that rescission was effective.

Reasoning

The court ruled that:

• The owner had clearly indicated intention to rescind
• Communication to authorities was sufficient where the rogue was unreachable
• The rogue’s title was avoided before resale
• The third party acquired no valid title

Principle

Rescission can be effected by clear conduct where direct communication is impossible.

10. Limits to the Right of Rescission

A. Discretion of the Court

Rescission is an equitable remedy. The court may refuse it if justice does not require it.

B. Restitution

The parties must be capable of restoring benefits received.

Erlanger v New Sombrero Phosphate Co

Facts

A company purchased a phosphate mine and worked it. Despite operations, the court allowed rescission on condition that the company returned the mine and accounted for profits.

Principle

Substantial restoration with accounting adjustments satisfies restitution requirements.

C. Affirmation

If the representee affirms the contract after discovering the misrepresentation, rescission is barred. Case in point: Caitec Motors v Top Kings supra. 

Long v Lloyd

Facts

A buyer purchased a lorry described as being in excellent condition. After discovering defects, he accepted partial repair compensation and continued using the vehicle. Later the lorry broke down completely and he sought rescission.

Decision

The court refused rescission.

Reasoning

By accepting repair compensation and continuing performance, the buyer affirmed the contract.

D. Lapse of Time

Delay may bar rescission, especially in innocent misrepresentation.

Leaf v International Galleries

Facts

A buyer purchased a painting misrepresented as a Constable. Five years later he discovered the truth and sought rescission.

Decision

The court refused rescission due to lapse of time.

E. Third Party Rights

Where third parties acquire rights in good faith and without notice, rescission is barred.

Illustrations

1. A land seller falsely states that a plot has building permit approval. The buyer relies on it and later discovers the truth. The buyer may rescind.
2. A bank officer negligently assures a customer about a company’s solvency. The customer relies and suffers loss. This may constitute negligent misrepresentation.
3. A vehicle dealer honestly but wrongly states that a car is brand new. The buyer may rescind but cannot claim damages if the statement was innocent.
4. A buyer inspects goods independently and relies on his own expert. Later discovering seller exaggeration does not entitle rescission.

Summary Table

Category	Nature of Fault	Burden of Proof	Remedies Available	Key Authorities
Fraudulent Misrepresentation	Dishonest false statement	On claimant	Rescission and damages	Derry v Peek
Negligent Misrepresentation	Careless statement in breach of duty	On claimant	Rescission and damages	Hedley Byrne v Heller
Innocent Misrepresentation	Honest false statement	On claimant	Rescission and indemnity	Newbigging v Adam
Operative Misrepresentation	Inducement and reliance	On claimant	Contract voidable	Bisset v Wilkinson, Atwood v Small
Silence and Continuing Representation	Failure to correct changed facts	On claimant	Rescission	With v O’Flanagan
Limits to Rescission	Equity and fairness factors	On claimant	Remedy barred	Long v Lloyd, Leaf v International Galleries