Are Pre-Contractual Representations 'Continuing'? Even If The Contracting Parties Change?

Circumstances change and what is true today may not be true tomorrow. For that reason, some representations carry with them the obligation to advise the representee if the relevant circumstances change. These are usually referred to as "continuing" representations.

But can a continuing representation carry with it the obligation to update a third party, to whom the representation was not even made? The UK Supreme Court says it can in Cramaso LLP v Ogilvie-Grant, Earl of Seafield and Others, a case with a peculiar set of facts which may have broad implications for parties engaged in pre-contractual negotiations.

Background

The Appellant, Cramaso LLP, was a vehicle formed by Mr. Alistair Erskine and his wife in order to enter into a lease of a grouse moor on which commercial shooting of grouse took place. The Respondents were the owners of the moor.

In the course of negotiations, prior to the formation of Cramaso LLP, the Respondents made representations concerning the grouse population to Mr. Erskine in an email. On the basis of this representation, Mr. Erskine decided to lease the moor and advised the Respondents that he intended to form an LLP to take the tenancy. Cramaso LLP was then incorporated and the lease was signed. Subsequently, Mr. Erskine discovered that the population figures were inaccurate.

At trial, Lord Hodge accepted that the email contained a material misrepresentation and held that the Respondents had acted honestly but negligently. Lord Hodge also accepted that the representation had induced Mr. Erskine to enter into the lease. However, Lord Hodge noted that the Appellant had not existed at the time the email was sent and therefore no duty of care could have existed between the Respondents and the Appellant (a duty of care is a necessary element of negligent misrepresentation).

The parties appealed to the Inner House which found that the non-existence of the Appellant was not determinative. Rather, relying on Caparo Industries plc v Dickman,the issue was whether it could have been reasonably foreseen that someone, other than Mr. Erskine, would have relied on the representation in the email. The Inner House held that it could not and therefore there was no "proximity" between the Appellant and the Respondent.

The Decision

The Supreme Court had a fundamental disagreement with the analysis engaged in by the lower courts. Rather than viewing the case as one where A had relied on a representation made by B to C, the court...